(Bloomberg Markets) — In the ballroom of the five-star Shangri-La Singapore hotel, Anthony Tan celebrated a triumph for the country’s up-and-coming tech scene. “Today we shine a spotlight on Southeast Asia!” he told the adoring crowd. His company, Grab, the region’s answer to Uber, was about to make its stock market debut.

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Tan had launched Grab Holdings Ltd. in 2012, just as ride-hailing companies were taking off. Masayoshi Son, the billionaire founder of Japan’s SoftBank Group Corp., one of Uber’s venture capital backers, was also behind Grab. Other investors included BlackRock, Fidelity, Morgan Stanley and Temasek, the Singapore state investment firm.

Not since the first internet boom of the 1990s had there been such hunger for unprofitable startups. Before it started publicly trading, Grab was valued at $40 billion, almost as much as American Airlines, Delta Air Lines and United Airlines combined. Tan, only 39 at the time, was on track to become a billionaire.

Even the date of Grab’s listing seemed auspicious. It read the same backward and forward: 12 02 2021. An eight-digit palindrome date will happen only 12 times this century. At 9:30 a.m. New York time, Tan and his co-founder, Tan Hooi Ling, rang the Nasdaq opening bell remotely from the Shangri-La. A blizzard of confetti showered the room. The Queen song We Are the Champions blasted out. But almost before the confetti hit the floor, Tan’s luck turned. The stock plunged 21% by the close of the trading day. Then it fell more. Even after a recent bounce, Grab is still down almost 70%.

The market’s cold appraisal raised questions about Grab’s future and Son’s investing acumen. It also hastened the demise of Wall Street’s latest mania. Grab had raised money in a complicated maneuver involving a corporate structure called a special purpose acquisition company, or SPAC. It was, and remains, the biggest SPAC deal in history.

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Grab’s stock slump represented a blow to its home base: Singapore. Since its independence in 1965, the city‑state of 5.9 million has prospered because it welcomes and supports industry and trade, ultimately becoming a hub for commodities and finance. Why not tech, too?

In 2011 the entrepreneurial arm of Singapore’s national university, along with a state-linked telecommunications company’s venture capital firm and a government agency for media development, started a tech incubator. Called Block71, it’s based in a dilapidated industrial building that had been slated for demolition. More than 1,100 companies have been nurtured through the center, which has outposts throughout Asia and in the US.

The area surrounding Block71 has attracted companies such as Canon and Fujitsu, as well as Grab, which has a nine-story headquarters there. Two other Singapore-based companies are neighbors: Razer, which makes computer-­gaming laptops, mice and headsets, and Sea, which developed the hit battle royal game Free Fire and whose Shopee ­e-commerce site competes against Amazon.com. (Razer Inc. also has a California headquarters.) Sea Ltd. was once the world’s hottest stock, surging more than 24-fold from its New York listing in 2017 through its peak in October 2021, reaching a market value of more than $200 billion.

But all three of Singapore’s biggest tech hopes have stumbled. Sea’s shares have fallen almost 90%; it laid off thousands to cut costs. Razer, which struggled as a public company, went private. Devadas Krishnadas, ­director of local consultant Future-Moves Group, says startups need to do more than burn investor capital and tout their growth potential. “Singapore’s aspirations for tech-powered growth have been predicated more on promise than performance,” he says.

The three Singapore tech companies are still very much in operation, and their stories remain to be told. Tan and other Grab executives have voiced confidence in the company’s future. “The feedback from our investors has been positive on the progress we are making toward profitability and balancing sustainable growth,” the company said in a statement.

I’ve also been part of Grab’s story. I’ve been covering the company for seven years, ever since investors started taking notice of its growth. Friendly and informal, Tan always greeted me with a hug. Then I had my own frightening experience with its service, which I reported in a first-person account that discussed the safety of Grab and other ride-hailing services. (More on that later.) I’ve followed Grab’s progress ever since and believe that its arc may help explain why tech has struggled in the region and why some venture capitalists were premature in calling Singapore the Silicon Valley of Asia.

Tan grew up in Malaysia and started his business in a storage room 11 years ago. In the country’s capital, Kuala Lumpur, his company, then called MyTeksi, let customers summon a taxi with a smartphone. Tan comes from a family of entrepreneurs. His grandfather made a fortune in the auto industry, co-founding Tan Chong Motor Holdings Bhd. in 1957 to assemble and sell Nissan cars in Malaysia. His father is president of the publicly traded company. Like many elite Asians, Tan pursued his higher education in the US, studying economics and public policy at the University of Chicago before getting his MBA from Harvard University.

Two years after starting his company, Tan met in Tokyo with Son, the SoftBank founder and chief executive officer. Son had earned renown for his wildly successful bet on Alibaba Group Holding Ltd., China’s Amazon. SoftBank committed $250 million to Tan’s business. In 2014 the company moved to Singapore and later changed its name to Grab as it prepared to accelerate its expansion across the region. (In 2020 the company opened a second headquarters, in Jakarta.)

On March 26, 2018, Grab bought Uber Technologies Inc.’s Southeast Asian business in return for a 27.5% stake in Grab. It was a major victory for Tan as Uber withdrew from the region. Grab integrated Uber Eats into an existing meal-­delivery business and branded it as GrabFood later that year.

The morning after the company’s deal with Uber, I got into a Grab to go to my daughter’s kindergarten graduation. The driver sped through a junction where he was supposed to stop and collided with two cars. The accident broke my neck and tore one of my body’s most important blood vessels. Tan, an outspoken Christian, visited me as I was healing, offered to pray in my home and gave me flowers and a get-well gift. The authorities found that the Grab driver was at fault. Tan later apologized in person for the pain he’d caused me and said the company was reviewing safety procedures, as it announced that October.

The experience made me curious, professionally, about the risks of fast-growing tech companies suddenly taking over the streets of cities around the world—not only Grab, but also its rivals. I wrote all this up in a feature for Bloomberg Businessweek that raised questions about safety, which Grab says has improved. According to a company report, 99.9% of rides and deliveries occurred without incident in 2022; as of last year, safety incidents per 1 million rides have fallen in half since 2019. I’ve since largely recovered. I never sought a lawsuit or a settlement related to the accident, so I could continue covering tech companies without any conflict of interest. Bloomberg paid my medical expenses.

I kept watching Grab’s rise. Tan’s photo appeared in a 2019 online presentation from SoftBank. The investment firm featured him alongside the CEOs of the companies it was betting on to succeed, such as WeWork Inc. founder Adam Neumann and Uber’s Dara Khosrowshahi. Their benefactor, Son, called himself a conductor of an orchestra of startups. All told, SoftBank would invest about $3 billion in Grab. Tan started to refer to his company as Southeast Asia’s leading “everyday super-app,” handling transportation, deliveries and financial services. With encouragement from the company’s ubiquitous advertising, Grab customers got used to highly discounted rides.

By 2020 investors saw Grab as a promising candidate to go public. Tan eventually settled on an exit strategy: the SPAC, also known as a blank-check company. In a complex arrangement, a sponsor—in Grab’s case, US-based Altimeter Capital Management—sets up a shell corporation and seeks to merge it with an actual company that has real operations, namely Grab. If an agreement is reached, they combine, and—presto—the actual company is now publicly traded. The setup allows the company to avoid the lengthy process of a traditional initial public offering. (Altimeter didn’t respond to requests for comment.) With SPACs growing more popular, few were asking questions. Many had great expectations for the Grab deal.

An exception was Eric Wen, an analyst who has his own research firm in Hong Kong, Blue Lotus Capital Advisors Ltd. The more Wen looked at Grab, the more skeptical he became. He saw that the company had fewer than 25 million monthly users at the time, about 7% of the customers of Chinese super-app Meituan. And, he realized, Southeast Asia had a smaller middle class and lower per-­capita income than China.

Grab had raised $12 billion in venture financing before the SPAC deal, according to data company Crunchbase. On a micro level, the math was grim. Grab spent $480 to win a customer, who’d then spend an average of $29 a year. In other words, it would take Grab more than 16 years to recoup its money. “It was like the tale of the emperor’s new clothes,” Wen says.

About six weeks after Grab’s stock debut, Wen outlined his concern in a report urging investors to sell. Shares were then trading for $6, having lost about half their value since the day of Grab’s launch as a public company. Wen predicted they’d fall to $3, which they did about two months later—and have remained near that level ever since.

Mak Yuen Teen, a professor of accounting at the National University of Singapore, sees a lesson in Grab’s travails. Investors took notice of Tan’s “great CV but never looked closely enough at the company’s corporate governance or the business model,” he says. For example, Tan controls 63% of Grab’s voting rights while holding only about 3% of its common stock. While technology companies often use dual-class share structures, Grab’s arrangement is striking because Tan owns such a small percentage of common shares compared with, say, Mark Zuckerberg, who holds a roughly 13% stake in Facebook parent Meta Platforms Inc.

And another arrangement might raise eyebrows: In March 2018, Tan’s mother was appointed as a board director, according to a filing. Today, as a public company, all its board members except the founders are independent directors.

To this day, unlike the founders of Uber and WeWork, Tan remains in charge. His co-founder, Hooi Ling, is stepping down from operating roles and as a director at Grab by the end of this year. And while many tech stocks have stumbled, some as much or more than Grab, Uber’s shares are down far less. Uber finally reported an operating profit in the second quarter. At the end of last year, Grab had accumulated losses of $16 billion, it reported in a filing.

To be sure, Uber had an easier road back. It can rely on its home market, the largest economy in the world. Singapore, while wealthy, is too small to support fast-growing consumer companies; some of Grab’s other Southeast Asian markets are difficult places to earn a profit quickly. And each market has its own languages, customs and regulations, making it a challenge to grow.

Grab is trying to bounce back. The company scaled down its super-app strategy, though it still offers payments and other digital banking services, along with rides and deliveries. SoftBank remains Grab’s largest shareholder, with a 19% stake, and its founder, who is widely called Masa, expresses confidence in Tan. “Masa respects Anthony’s leadership and believes in the bright future of Grab,” SoftBank said in a statement. Uber still holds a 14% stake. Tan didn’t sell any shares through Grab’s going-public deal and had agreed to a lock-up provision through May, according to the company, which says his stake is bigger now than it was at the time of the original transaction.

Grab remains a substantial business with about 35 million monthly users. Operating in eight countries and more than 500 cities, it posted revenue of $1.4 billion last year, and its market value is more than $13 billion. It’s a household name in the region; its logo—“Grab,” often written with two green lines that curve like a roadway—is a familiar sight from Bangkok to Borneo. The vast majority of analysts covering Grab recommend its shares.

One day in August, Grab’s stock jumped 11% after it posted a narrower quarterly loss. “More people are using Grab now than ever before,” Tan told investors, as the company detailed efforts to trim expenses and move toward profitability. Citigroup Inc. analysts praised the company for “effective cost control.” Grab points to strong revenue growth and six consecutive quarters of improvement in its favored measure of profit, which excludes interest payments, taxes and certain noncash items. Grab has “plenty of room to grow in Southeast Asia,” the company said in its statement.

No one is counting out Singapore as a tech hub, either. A government report last week said the country’s digital economy will continue to drive its growth and already amounts to about $77 billion, or 17.3% of gross domestic product.

Singapore is betting on specialty chips for cars and phones. Its Economic Development Board cited an “unprecedented semiconductor super-cycle,” as Singapore attracted a record S$22.5 billion ($16.5 billion) in investments last year related to chips and other assets. On Sept. 22, Carousell, an online marketplace for second-hand goods, unveiled a new regional headquarters near Block71.

Emily Liew, assistant CEO at Enterprise Singapore, a government organization that’s supporting the country’s development as a startup hub, says tech companies must evolve in an era of muted growth. “The size of our market is not a limiting factor, as our startups build with global scale in mind,” she says.

At a September conference, Jenny Lee, a managing partner of venture firm GGV Capital, an early investor in Grab, said food technology is another promising investment. As the first nation to approve the sale of lab-grown meat, Singapore has set a goal of producing 30% of its nutritional needs locally by 2030. “This policy support is going to be extremely important,” said Lee, who’s also on the board of Temasek, the state investment firm that backed Grab.

Earlier this year, Kay Woo, an entrepreneur, sketched out his dream to make it big in Asia. His Singapore office displays an electric three-wheeled rickshaw, called a tuktuk. The contraption carries around passengers in Cambodia for his ride-hailing service. Woo calls his app Tada, as if the rides appear instantly, like a magic trick.

But his business model is different from Grab’s. He relies on word-of-mouth, not advertising, and he doesn’t charge drivers a commission. Riders and drivers pay Tada a small fee. “We were smaller than one of Grab’s toes when we started,” he says. “And with many people now using Tada, it feels like we’ve been vindicated.”

In Singapore, the quest to make money in ride-­hailing—and the rest of tech—carries on. —With Min Jeong Lee, Olivia Poh, Pei Yi Mak, Yoojung Lee and Elffie Chew

Lee covers tech from Bloomberg’s Singapore bureau.

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