has shed about 60 people while hitting the brakes on renting its cars to riders and consolidating its global operations team, according to people familiar with the matter and an employee memo reviewed by The Wall Street Journal.
The cuts covered less than 2% of staff and mainly affected employees who worked in operations, the people said. In a memo to some staff sent Tuesday, the company said it was folding the part of its business that allowed consumers to rent its fleet of cars on the app.
“Our road to scaling first party rentals is long and challenging with significant uncertainty,” according to the memo, sent by Cal Lankton, vice president of fleet and global operations at Lyft. Mr. Lankton wrote that conversations about exiting the business started last fall and “then accelerated as the economy made the business case unworkable.”
Lyft shares rose around 8% Wednesday to close at $14.70, while the tech-heavy Nasdaq Composite Index climbed less than 2%.
The company said it is going to continue working with big car-rental companies. Lyft’s car-rental business had five locations while it has car-rental partnerships with
Sixt
SE and
Hertz Global Holdings Inc.
in more than 30 locations, a spokeswoman said.
“This decision will ensure we continue to have national coverage and offer riders a more seamless booking experience,” the spokeswoman said in a statement.
The company also is reorganizing its global operations team, consolidating from 13 to nine regions and closing a location in Northern California and its Detroit hub, according to the memo.
Lyft joins other tech companies that are trimming staff or scaling back hiring plans as economic challenges cool the once-hot sector. The industry has been hiring at a rapid pace for years, but easy money is drying up and share prices have been plunging amid the reversal of some pandemic trends, high inflation, supply-chain shortages and growing worries about an economic slowdown.
Lyft’s stock has fallen more than 70% in the past 12 months compared with the less than 20% decline in the Nasdaq Composite Index.
In May, rival Uber Technologies Inc. said it would slow hiring. Its stock has halved over the same period.
Last week, Alphabet Inc.’s Google said it will slow hiring for the rest of the year while Microsoft Corp. cut a small percentage of its staff, attributing the layoffs to regular adjustments at the start of its fiscal year. Rapid-delivery startup Gopuff cut 10% of its staff last week, citing growing concerns about the economy.
Earlier this month,
Facebook
-parent Meta Platforms Inc.’s head of engineering told managers to identify and push out low-performing employees, according to an internal post. Snap Inc. Chief Executive
Evan Spiegel
recently told staff the company would slow hiring, warning that the economy “has definitely deteriorated further and faster than we expected.”
In May, Lyft President
John Zimmer
said in a staff memo the company planned to slow hiring, reduce the budgets of some of its departments and grant new stock options to some employees to make up for its eroding share price. At the time, Mr. Zimmer said the company didn’t plan to cut staff.
After enduring the pandemic, ride-share companies like Uber and Lyft are now facing a new world of high inflation, driver shortages, and dwindling passenger numbers. WSJ’s George Downs explains what they’re doing to try and survive. Illustration: George Downs
Write to Preetika Rana at preetika.rana@wsj.com and Emily Glazer at emily.glazer@wsj.com
Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy and sales and shutdowns continue, according to a review of public statements and securities filings.
Almost 1,000 Western businesses have pledged to exit or cut back operations in Russia, following its invasion of Ukraine, according to Yale researchers.
Many are reassessing the reported value of those Russian businesses, as a weakening local economy and a lack of willing buyers render once-valuable assets worthless. Companies under U.S. and international reporting standards have to take impairment charges, or write-downs, when the value of an asset declines.
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The write-downs to date span a range of industries, from banks and brewers to manufacturers, retailers, restaurants and shipping companies—even a wind-turbine maker and a forestry firm. The fast-food giant
McDonald’s Corp.
expects to record an accounting charge of $1.2 billion to $1.4 billion after agreeing to sell its Russian restaurants to a local licensee;
Exxon Mobil Corp.
took a $3.4 billion charge after halting operations at an oil and gas project in Russia’s Far East; Budweiser brewer
Anheuser-Busch InBev SA
took a $1.1 billion charge after deciding to sell its stake in a Russian joint venture.
“This round of impairments is not the end of it,” said Carla Nunes, a managing director at the risk-consulting firm Kroll LLC. “As the crisis continues, we could see more financial fallout, including indirect impact from the conflict.”
The financial fallout of the conflict isn’t significant for most multinationals, in part because of the relatively small size of the Russian economy. Fewer than 50 companies account for most of the $59 billion tally. Even for those, the Russian losses are typically a relatively small part of their overall finances. McDonald’s, for example, said its Russia and Ukraine businesses represented less than 3% of its operating income last year.
Some companies are writing off assets stranded in Russia. The Irish aircraft leasing company
AerCap Holdings
NV last month took an accounting charge of $2.7 billion, which included writing off the value of more than 100 of its planes that are stuck in the country. The aircraft were leased to Russian airlines. Other leasing companies are taking similar hits.
Other businesses are assuming that they will realize no money from their Russian operations, even before they have finalized exit plans. The British oil major
BP
PLC’s $25.5 billion accounting charge on its Russian holdings last month included writing off $13.5 billion of shares in the oil producer
Rosneft.
The company hasn’t said how or when it plans to divest its Russian assets.
BP’s $25.5 billion accounting charge on its Russian holdings include writing off $13.5 billion of shares in oil producer Rosneft.
Photo:
Yuri Kochetkov/EPA/Shutterstock
Even some companies that are retaining a presence in Russia are writing down assets. The French energy giant
TotalEnergies
SE took a $4.1 billion charge in April on the value of its natural-gas reserves, citing the impact of Western sanctions targeting Russia.
The Securities and Exchange Commission last month told companies that they have to disclose Russian-related losses clearly, and that they shouldn’t adjust revenue to add back the estimated income that has been lost because of Russia.
Bank of New York Mellon Corp.
, which in March said it had stopped new banking business in Russia, appeared to breach this guidance when it reported its results for the first three months of this year. The New York custody bank in April reported $4 billion in revenue under one measure that included $88 million added to reflect income lost because of Russia.
A BNY Mellon spokesman declined to comment.
Investors appear to have mixed reactions to the write-downs, partly because most multinationals have relatively small Russian exposure, academic research suggests.
Financial markets are “rewarding companies for leaving Russia,” a recent study by Yale School of Management found. The share-price gains for companies pulling out have “far surpassed the cost of one-time impairments for companies that have written down the value of their Russian assets,” the researchers concluded.
Bank of New York Mellon said earlier this year that it had stopped new banking business in Russia.
Photo:
Gabriela Bhaskar/Bloomberg News
Research using a different methodology found a more subtle investor reaction. Analysis by Indiana University professor Vivek Astvansh and his co-authors of the short-term market impact of more than 200 corporate announcements revealed a marked trans-Atlantic divide. Investors punished U.S. companies for pulling out of Russia, and non-American companies for not withdrawing, the analysis found.
More write-downs and other Russia-related accounting charges are expected in the coming months, as companies complete their planned departures from the country.
British American Tobacco
PLC, whose brands include Rothmans and Lucky Strike, said on March 11 it had “initiated the process to rapidly transfer our Russian business.” That transfer is still ongoing, according to a BAT spokeswoman. BAT hasn’t taken an impairment in relation to the business.
Accounting specialist
Jack Ciesielski
said companies might hold off announcing a write-down until they have a good handle on how big the loss will be.
“You don’t want to put a number out there until you’re confident that it’s not likely to change,” said Mr. Ciesielski, owner of investment research firm R.G. Associates Inc.
The ruble’s recovery is helping Russia prop up its economy and continue its Ukraine war effort. WSJ’s Dion Rabouin explains how Russia boosted its ailing currency and how it is affecting the global economy. Illustration: Ryan Trefes
Many companies are giving investors rough estimates about what to expect on Russia-related losses.
The manufacturer
ITT Inc.,
which has suspended its operations in Russia, said last month it expects a $60 million to $85 million hit to revenue this year because of a “significant reduction in sales” in the country. That is a small slice of the $2.8 billion in total revenue for the maker of specialty components for the auto, aerospace and energy industries.
As sanctions weaken the Russian economy, businesses still operating there are reassessing their future earnings and booking losses. Ride-sharing giant
Uber Technologies Inc.
in May took a $182 million impairment on the value of its stake in a Russian taxi joint-venture because of forecasts of a protracted recession in the Russian economy. Uber said in February it was looking for opportunities to accelerate its planned sale of the stake.
—Thomas Gryta and Nick Kostov contributed to this article.
will slow hiring, reduce the budgets of some of its departments and grant new stock options to some employees to make up for its eroding share price, joining rival
Uber Technologies Inc.
UBER -9.38%
in outlining cuts as investor optimism cools on tech stocks.
President
John Zimmer
announced the measures Tuesday in a memo to staff.
“It’s clear from our discussions with other business leaders that every company is taking a hard look at how they respond to concerns about an economic slowdown and the dramatic change in investor sentiment,” Mr. Zimmer wrote in an internal memo viewed by The Wall Street Journal.
“Given the slower than expected recovery and need to accelerate leverage in the business, we’ve made the difficult but important decision to significantly slow hiring in the US,” he said.
That includes the company giving priority to fewer initiatives, not filling many of the current open roles and focusing hiring on roles deemed critical, such as those that support its core rides business, Mr. Zimmer said. He said there are no layoffs planned.
Lyft’s board met on Friday to discuss the cuts, said a person familiar with the meeting. Lyft began signaling to some employees recently that there would be a hiring slowdown and cutting of budgets, another person familiar said.
Lyft shares have lost more than 60% since the start of the year, more than double the decline of the Nasdaq Composite Index. After declining more than 15% Tuesday, Lyft shares were up less than 1.5% in after-hours trading after the Journal reported about the plans.
Uber Technologies also has outlined budget cuts. An Uber driver in Paris.
Photo:
Nathan Laine/Bloomberg News
Tech companies that powered the U.S. economy during the pandemic are suffering through a punishing stretch. Concerns about rising interest rates and the reversal of some pandemic trends that bolstered tech revenues have hit the share prices of
Peloton Interactive Inc.,
PTON -8.08%
Netflix Inc.,
Amazon.com Inc.
AMZN -3.21%
and others.
Last month Amazon reported the slowest quarterly revenue growth in about two decades. Netflix lost subscribers during its first quarter for the first time in more than a decade and signaled that losses are set to continue.
Apple Inc.
AAPL -1.92%
cautioned that the resurgence of Covid-19 in China could hinder sales.
The shares of
Snap Inc.
SNAP -43.08%
tumbled 43% Tuesday after it said in a Monday filing that revenue and adjusted pretax earnings for the second quarter will come in below the range the company projected barely a month ago due to weak advertising revenues. Other tech stocks that rely on digital advertising, including Google parent
Alphabet Inc.
GOOG -5.14%
and
Facebook
parent
Meta Platforms Inc.,
FB -7.62%
also fell.
After years of adding jobs at a rapid pace, some tech companies have been broadcasting that they think it is time to take a more cautious approach. The pullback by tech giants raises questions about the direction of the overall U.S. job market and economy.
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Meta, Peloton and Uber are among the tech companies that have announced they will slow hiring or re-evaluate their head count in recent weeks.
Among the other issues cooling the long-hot sector: inflation, labor shortages and supply-chain issues.
Uber and Lyft are struggling with a year-long driver shortage that has pushed fares to record highs. The elevated fares have partly resulted in fewer Lyft riders and fewer Uber trips compared with before the health crisis, though both companies’ first-quarter revenue outpaced prepandemic levels on the back of higher prices.
Lyft’s first-quarter results were overshadowed by a weaker-than-expected earnings outlook as the company said it would need to spend more money to incentivize drivers to return. Its stock tumbled more than 35% after the announcement, marking the biggest percentage drop in a single day since the company went public in 2019.
Earlier this month, Uber said it would cut spending on marketing and scale back on hiring as it focuses on turning a profit.
Both companies spent big for years to gain customers and market share. But their 2019 public offerings disappointed, with Wall Street increasingly wanting to see money-losing companies turn a profit.
“As we’ve seen and discussed, public market investors have continued to sharply shift their focus onto a potential recession and a company’s ability to deliver near-term profits,” Mr. Zimmer wrote in Tuesday’s memo.
He went on to write that “our near-term action plan will be focused on accelerating profits—whether we like it or not, that’s the ticket of entry in today’s market.”
Uber and Lyft have trimmed their losses, unloading costly divisions such as their self-driving units and cutting staff during the health crisis. Both companies turned a quarterly adjusted profit before certain expenses like interest, taxes and depreciation last year.
Uber said it expects to be cash-flow positive on a full-year basis this year. If it meets that goal, it would mark the first time the underlying operations of the ride-share and food-delivery giant generate more money than it spends.
Write to Preetika Rana at preetika.rana@wsj.com and Emily Glazer at emily.glazer@wsj.com
The number of diners seated at restaurants nationwide was down 15% in the week ended Dec. 22 from the same period in 2019, a steeper decline than in late November, data from reservations site OpenTable show. U.S. hotel occupancy was at 53.8% for the week ended Dec. 18, slightly below the previous week’s level, according to STR, a global hospitality data and analytics company.
Rising case numbers are leading many businesses to close for a short period, entertainment venues to cancel shows, universities to shift classes online and offices to delay or reverse reopening plans.
“We are still on track for very strong fourth-quarter consumption, but I am now seeing that that momentum continues to fade,” said
Aneta Markowska,
chief economist at Jefferies LLC.
Still, low unemployment, substantial savings and briskly rising wages are giving Americans money to spend. Many are also eager to go out and gather with family after nearly two years of social-distancing protocols. In the 10 days through Dec. 22, the number of travelers passing through Transportation Security Administration checkpoints was more than double the number of passengers flying in the same period of 2020, though still below 2019 levels.
Employers are clinging to workers in a tight labor market. Jobless claims, a proxy for layoffs, were unchanged at 205,000 in the week ended Dec. 18, the Labor Department said Thursday. Claims are hovering near the lowest level in more than half a century despite rising concerns about Omicron.
Consumers boosted their spending by 0.6% last month, a slowdown from 1.4% growth in October, the Commerce Department reported Thursday. Economists attributed part of the November slowdown to consumers shifting their holiday purchases a month earlier, amid warnings of potential shortages due to supply-chain problems.
For now, economists expect the highly contagious Omicron variant to cause a short-term soft patch for spending and broader economic growth as some people stay home.
Many economists have lowered their growth projections for early 2022 due to growing concerns about the latest surge in coronavirus cases. The forecasting-firm Oxford Economics now expects U.S. gross domestic product to grow at a 2.5% annual rate in the first quarter, down from a previous estimate of 3.4% growth.
Much of the difference in output could be delayed, rather than lost altogether. Economists at Nomura lowered GDP forecasts for the current quarter and the first quarter of 2022, in part reflecting forecasts for weaker consumer spending tied to Omicron. However, they expect growth to pick up in the second half of next year as pandemic-induced supply-chain disruptions ease and inventory investment that was pushed off materializes.
Though each wave of rising Covid-19 cases appears to be less detrimental to the economy than the one before it, some economists say that Omicron poses different threats.
As the cost of groceries, clothing and electronics have gone up in the U.S., prices in Japan have stayed low. WSJ’s Peter Landers goes shopping in Tokyo to explain why steady prices, though good for your wallet, can be a sign of a slow-growing economy. Photo: Richard B. Levine/Zuma Press; Kim Kyung Hoon/Reuters
For instance, Omicron is hitting the Northeast harder than other recent virus surges. Businesses in the region tend to be more willing to impose their own restrictions to curtail the virus than some other areas of the country, said Ms. Markowska of Jefferies.
The economy is also further into the reopening process than earlier in the pandemic, meaning Omicron has the potential to reverse reopenings rather than just delay them, Ms. Markowska said. She said that office occupancy might decline due to Omicron’s spread, which could damp demand for services such as cafeterias.
CNN President
Jeff Zucker
on Saturday told staffers the network was closing its offices with the exception of those who need to be there to perform their jobs.
Ford Motor Co.
,
Uber Technologies Inc.
and
Alphabet Inc.’s
Google all delayed office returns recently amid Omicron’s spread.
Bars in New York and Nashville announced temporary closures due to breakthrough infections among staff. A museum at the University of Illinois at Chicago said it would shut its doors for over a month and only offer virtual tours amid the rapid spread of the Omicron variant.
Some of the most popular Broadway shows, including “Hamilton” and “The Lion King,” have canceled performances through Christmas. Harvard University said it would start the winter semester online for three weeks to reduce density on campus.
Omicron is also keeping some sick workers at home for a period. This sort of dynamic could further restrain factories’ ability to pump out goods. Product shortages have been a major impediment to consumers’ ability to spend.
“It’s not that there’s a lack of demand for goods; in fact, that’s been one of the big surprises of 2021,” said
Andrew Hollenhorst,
chief U.S. economist at
Citigroup Inc.
“It goes back to the supply chain. You just cannot source these goods.”
A dearth of available goods could drive inflation higher. The personal-consumption expenditures price index, which is the Federal Reserve’s preferred inflation gauge, rose 5.7% in November from a year earlier, the fastest increase since 1982, the Commerce Department said Thursday. So-called core prices, which exclude volatile food and energy items, increased 4.7% year-over-year in November, the highest reading since 1989.
That meant after adjusting for inflation, consumer spending was unchanged in November from October, and after-tax personal income fell 0.2%.
So far, fast-rising costs don’t appear to be derailing consumers’ appetite to spend, though some individuals are concerned about the longer-term outlook for inflation.
David Esguerra,
a 35-year-old from Phoenix, said he has seen prices rise rapidly. Pet-grooming services—including a bath and nail trimming—for his terrier mix Sofie have shot up to about $80 from $60 last year. Croissants at the farmers market cost roughly $6 this year, up from $4 in 2020, he said.
The supply-chain engineer’s pay raise this year was below the rate of inflation. As a result, he has adjusted his spending habits. For instance, he sought out furniture on secondhand markets like Craigslist to outfit his new home, and he is cutting back on purchases of clothes, shoes and phone accessories.
Mr. Esguerra isn’t overly concerned about his ability to afford daily necessities in the short term. He worries, though, about whether this bout of inflation will last. “My concern is more about long-term, how is this going to affect my financial future?” he said. “Is inflation going to stay high?”
Waning fiscal stimulus could also influence some contours of the economy’s growth path. After the pandemic hit in spring 2020, the federal government responded with expanded unemployment benefits of up to $600 extra a week, multiple rounds of stimulus checks and a boost in the 2021 child tax credit by as much as $1,600 per child.
Americans are now running through large piles of extra cash they accumulated as a result of government stimulus. As they deplete their savings, some workers might re-enter the labor force and help businesses fill job openings and meet production needs. With a much smaller share of worker incomes coming from government stimulus spending, wage growth will become a more important source of spending power in the coming months.
Write to Sarah Chaney Cambon at sarah.chaney@wsj.com and Harriet Torry at harriet.torry@wsj.com
Fed Chair Jerome Powell’s press conference Wednesday afternoon will be closely watched.
Kevin Dietsch/Getty Images
The
Dow Jones Industrial Average
was slightly lower Wednesday morning after closing at a record high Tuesday as markets await the Federal Reserve’s monetary policy decision.
In morning trading, the Dow was off 75 points, or 0.2%, after the blue-chip benchmark closed above 36,000 for the first time. The
S&P 500
fell 0.1%, while the
Nasdaq Composite
was essentially flat. All three indexes ended Tuesday at new all-time highs.
Today the spotlight is squarely on the Federal Open Market Committee (FOMC)—the Federal Reserve’s monetary-policy body. Its monthly meeting got under way Tuesday and will wrap up Wednesday with a statement from Fed Chair Jerome Powell.
“Stock futures are little changed near record highs as a sense of Fed paralysis grips the markets ahead of the FOMC announcement today,” wrote Tom Essaye, founder of Sevens Report Research before the market opened.
It’s largely expected that the central bank will announce that it will start slowing, or tapering, its Covid-19 pandemic-era program of monthly asset purchases, which add liquidity to markets. The Fed has been buying $120 billion in bonds to keep their prices high and yields low since June 2020, when it settled into a steady pattern after more fervent bond-buying near the beginning of the pandemic.
Markets now largely expect that the Fed will begin slowing these purchases, which consist of Treasury securities and agency mortgage-backed securities, at a rate of about $15 billion a month, starting this month. If the central bank announces a faster pace, investors could react negatively, and it could put pressure on stocks.
The larger risk is that the Fed could indicate that it is considering short-term interest rate hikes sooner rather than later. With inflation running hot and economic growth slowing, an indication of a rate hike too soon could also cause a selloff in stocks.
“It is widely expected the central bank will commence tapering in November or perhaps December,” wrote Kent Engelke, chief economic strategist at Capitol Securities Management. “The question at hand is whether or not it will change its time line as to when it intends to increase the overnight rate.”
As the Fed looms, not even solid economic data could move stocks higher. The ADP jobs report showed that the U.S. added 571,000 private-sector jobs in October, above the consensus forecast for 395,000.
Also read: Is Inflation Here to Stay? The Data Are Cause for Worry. The Fed Will Have its Say Today
Overseas, Hong Kong’s
Hang Seng Index
slipped 0.3% as investors in Asia tread water ahead of the FOMC meeting. The pan-European
Stoxx 600
was up 0.1% as investors in Europe adopted a similar wait-and-see attitude.
In commodity markets, oil prices fell back amid indications that U.S. crude supply is higher than expected and pressure on the OPEC+ group of national producers to ramp up production.
U.S. futures for West Texas Intermediate crude were down 2.5% to around $81.80 after trading near $85 earlier in the week—the highest levels since late 2014.
Analysts cited data from the American Petroleum Institute Tuesday showing that U.S. crude inventories jumped by 3.6 million barrels last week—far more than the 1.5 million estimated—in a surprise to supply expectations. That puts the spotlight on official data Wednesday from the U.S. Energy Information Administration.
Here are six stocks on the move Wednesday:
Lyft (ticker: LYFT) stock gained 11% after the company’s earnings report showed a more than 50% rise in adjusted earnings before interest, tax and non-cash expenses. Sales were $864 million, above expectations for $863 million.
Lyft’s results helped rival
Uber (UBER) stock rise 5.6% ahead of its Thursday earnings report.
Bed Bath & Beyond (BBBY) stock gained 34% after the company announced a partnership with
Kroger (KR) to sell certain products at the grocer’s locations and through online channels. Still, the Bed Bath & Beyond stock is also benefiting from its status as a “meme stock,” so the initial buying has forced short-sellers to buy shares back.
Zillow Group (ZG) stock dropped 19% after seeing several analyst downgrades after the company said it will terminate its home buying and selling business.
Shake Shack (SHAK) stock gained 3.8% after getting upgraded to Buy from Neutral at Northcoast.
CVS Health (CVS) stock rose 3.6% after the company reported a profit of $1.97 a share, beating estimates of $1.78 a share, on sales of $73.8 billion, above expectations for $70.5 billion.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
Chinese ride-hailing goliath Didi Global Inc. priced its IPO at $14 on Tuesday afternoon, according to people familiar with the matter, setting the stage for the company to begin trading Wednesday, after it made a lightning-fast pitch to potential investors.
The company sold more stock than it had planned, though the new deal size couldn’t immediately be learned. Given the upsizing, the pricing would give Didi a market capitalization of more than $67 billion, which would trail U.S. ride-hailing firm Uber Technologies Inc.’s roughly $95 billion but land well ahead of Lyft Inc., which sits at roughly $20 billion.
Didi’s fully diluted valuation, which typically includes restricted stock units, would easily eclipse $70 billion at the initial-public-offering price, confirming earlier reports by The Wall Street Journal.
Didi’s pricing comes just three business days after it launched its roadshow, making it one of the shortest investor pitches for an initial public offering in recent memory, according to bankers, investors and lawyers.
Didi ran its roadshow through round-the-clock virtual meetings because of time-zone differences, according to people who participated. Company executives focused on Didi’s scale and potential for continuing growth, the people said. The executives emphasized that 70% of China’s population will live in cities by 2030 and that few people own cars in those cities—and far fewer than in the U.S. Didi argues it is in position to capitalize on that, from shared mobility in general to its investments in electric vehicles and artificial intelligence.
Grab Holdings Inc. is in talks to go public through a merger with a SPAC that could value the Southeast Asian ride-hailing startup at as much as $40 billion, making it by far the largest such deal on record.
The Singapore company is discussing a deal with a special-purpose acquisition company affiliated with Altimeter Capital Management LP that would value it at between $35 billion and $40 billion, according to people familiar with the matter. (Altimeter has two SPACS; it couldn’t be learned which one is in talks with Grab.)
As part of the deal, Grab would raise between $3 billion and $4 billion in a so-called PIPE, a funding round that typically accompanies a SPAC merger, the people said. That amount could still change as Grab and Altimeter will start meeting with mutual funds and other potential investors soon, some of the people said.
The parties could announce the deal in the next few weeks, though the talks could still fall apart and Grab could revert to an earlier plan to stage a traditional initial public offering on a U.S. exchange this year.
Should they move forward with a SPAC deal, it would be the high-water mark in a recent explosion of such transactions, in which an empty shell raises money in an IPO with plans to later find one or more companies to merge with. In some cases, the SPAC ends up with only a small sliver of the newly public target.
The vehicles have caught fire in the last couple of years, with everyone from former baseball player Alex Rodriguez to ex-House Speaker Paul Ryan getting in on the action. They have helped break a bottleneck between the private and public markets as companies that were reluctant to go public line up to combine with SPACs, which offer in many cases a speedier route to a listing without costs and disclosure limitations that accompany traditional IPOs.
The biggest SPAC deal to date is United Wholesale Mortgage’s roughly $16 billion combination with Gores Holdings IV Inc., announced in September. The biggest one so far this year is electric-vehicle company Lucid Motors Inc.’s agreement last month to merge with Michael Klein’s
Churchill Capital Corp.
IV, a deal valued at nearly $12 billion, according to Dealogic.
So far this year, a record $70 billion-plus has been raised for SPACs, which account for more than 70% of all public stock sales, according to Dealogic. A slew of companies are in talks for a SPAC merger or already have agreed to one, including office-sharing firm WeWork, online photo-book maker Shutterfly Inc. and online lender Social Finance Inc.
In addition to ride-hailing, Grab, which traces its roots back to 2011, delivers restaurant, grocery and other items and provides digital financial services to merchants.
Its backers include
SoftBank Group Corp.
,
Uber Technologies Inc.
and
Toyota Motor Corp.
It was last publicly valued at around $15 billion in an October 2019 fundraising round, according to PitchBook.
Its valuation is on the rise as public investors pile into other ride-hailing and food-delivery companies. Uber’s shares have jumped sharply in the past several months, while
DoorDash Inc.
went public in December at a valuation far in excess of where it had raised money privately. The restaurant-delivery company now has a market capitalization of nearly $47 billion.
Altimeter’s SPACs—Altimeter Growth Corp. and Altimeter Growth Corp. 2—raised $450 million and $400 million in October and January IPOs, respectively. Altimeter Capital, of Menlo Park, Calif., has around $16 billion under management and primarily invests in technology companies.
The firm has racked up a string of successful investments and was one of the main participants in a January round of funding
Roblox Corp.
raised ahead of its IPO at $45 a share. In its debut Wednesday, shares of the videogame platform traded more than 50% above that level and continued rising Thursday.
SoftBank, which invested through its Vision Fund, is also poised to win big on Grab, just as another of its bets proves to be a gigantic winner: The Japanese technology-investing giant has now made roughly $25 billion on paper on its $2.7 billion investment in South Korean e-commerce company
Coupang Inc.,
which soared 41% in its trading debut Thursday.
Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ
Write to Maureen Farrell at maureen.farrell@wsj.com
U.S. stock futures climbed Wednesday ahead of U.S. inflation data, suggesting that the major indexes will resume this month’s rally.
Futures tied to the S&P 500 and the Dow Jones Industrial Average gained 0.3%. Contracts on the technology-heavy Nasdaq-100 also advanced 0.3%. Both the S&P 500 and the Dow closed lower on Tuesday after notching record highs earlier in the week.
Stocks have pushed higher this month, with the benchmark S&P 500 notching its eighth record close of the year on Monday. Investors are betting that President Biden’s $1.9 trillion stimulus package will help bolster the economy while vaccinations help reduce Covid-19 fatalities. Investor sentiment has also been buoyed by companies’ quarterly results that have largely proved to be better than expected.
“As long as earnings estimates are going up, stocks are going up,” said Andrew Slimmon, a managing director and portfolio manager at Morgan Stanley Investment Management. “The magnitude of the earnings beats we have seen are so great because earnings have been way underestimated.”
Ahead of the opening bell, ride-hailing firm Lyft rose over 12% after posting a narrower annual loss, suggesting the company is moving toward profitability. Rival Uber Technologies is among the companies scheduled to release its results after the market closes. Uber rose more than 6% premarket.
