SoftBank Group Corp.-backed GrabTaxi Holdings Pte. Ltd. will have to pay $2 billion or more to U.S.-based Uber Technologies Inc. if the Singapore-based ride-hailer does not go public by March 25, 2023.
According to its IPO prospectus filed on April 11, Uber has the right to redeem its 23.2% stake, or 409 million shares, in Grab for cash in the "absence of a Grab IPO." If Uber exercises its redemption right, Grab will have to pay $2.26 billion or more.
"The redemption price is equal to the sum of the issue price of $5.54 with any declared but unpaid dividends, and compounded interest of 6% per annum on the issue price," the prospectus states.
Uber, according to its prospectus, held 23.2% of Grab shares as of the end of 2018, diluted from 27.5% as originally announced last March. It received 401 million shares of Grab's series G preferred stock on the closing date of the merger deal and an additional 8 million shares during 2018, the document stated.
Uber classified its holdings in Grab as "available-for-sale debt security."
The prospectus also restricts Uber from competing with Grab in Southeast Asia "through the longer of March 2023 or one year after Uber disposes of all interests in Grab."
The disclosure follows Grab's announcement that it aims to raise another $2 billion from SoftBank Group and other investors in funding, according to a Reuters report. The ride-hailing firm recently secured over $4.5 billion in funding from a group of investors including SoftBank's venture capital arm SoftBank Vision Fund and Toyota Motor Corp.
Among other backers of Grab are Microsoft Corp. and Hyundai Motor Co.
Grab started massive financing shortly after it acquired most of Uber's Southeast Asia operations, in exchange for a stake in Grab.
According to a Nikkei Asian Review April 12 report, Grab CEO Anthony Tan in a February interview told the newspaper that the public market is "an option" and added that an IPO would not happen during 2019.
Uber's CEO Dara Khosrowshahi sits on Grab's board and compensation committee.