Gerstner says traditional IPO costs include upfront fees and structural underpricing as the larger expense.
“There's the upfront fee, five and a half, 6%, whatever they're paying on the amount of capital raised. But he would argue the much bigger expense, right, is the indirect cost of the structural underpricing.”
Gerstner claims Grab achieved 20-30% higher valuation than traditional IPO would have delivered.
“So in a traditional IPO, let's say you have a $10,000,000,000 enterprise value raising a billion dollars. If it's being underpriced, he would argue structurally by 40%.”
Gerstner calculates over $1 billion in cost savings for Grab employees and shareholders.
“And so if you say it's 30 percent on a $4,000,000,000 raise, that's over a billion dollars of savings. Right? Over $1,000,000,000 of indirect cost savings to the employees and the shareholders.”