Grab Holdings (NASDAQ:GRAB) is a delivery, e-commerce, and fintech company that’s focused on various Southeast Asian markets. The company came public via a special purpose acquisition company (SPAC). Specifically, it merged with a SPAC named Altimeter Growth Corp recently and changed its ticker symbol to “GRAB.”

GRAB stock has not gotten off to the most auspicious of beginnings. Indeed, I warned readers about Grab’s terrible financial performance back in November. That was back when the company was still trading under the Altimeter name, and  the shares were changing hands for around $14 each. In just two months, the stock has declined by 50%. After such a big drop, let’s see if the situation looks a little more interesting.

Oversupply Is a Massive Problem

It’s clear that there are simply too many delivery companies chasing after the same potential customers. There would probably be nothing wrong with their business models if there was much less competition in the sector.

However, since there are seemingly 1 million firms all trying to do the same thing, labor costs are high and prices are low. If you’re a restaurant owner, there are at least half a dozen different companies that can handle your orders. In that environment, the portion of the bill that goes to each delivery company will be relatively low.

In addition, labor shortages are becoming a major issue for the sector. That’s true of the economy in general and of  lower-paid positions such as ridesharing and delivery drivers in particular.

Grab Could Be Interesting If It Survives Long Enough

Recently there was an interesting piece of news for Asian rideshare firms . A European player in the space, Delivery Hero, is pulling out of the Japanese market. Delivery Hero had operated under the Foodpanda brand there. However, the company announced that it is exiting Japan this year, giving a shortage of delivery drivers and mounting competitions as the principal reasons for its departure.

Now Japan hasn’t been and isn’t a key market for Grab. The company is primarily focused on Southeast Asian markets, such as Thailand. However, Grab did try its hand at the Japanese market in 2019 and could eventually enter it more aggressively down the road. More broadly, delivery companies are starting to respond more to their tough competition and poor profit margins, rather than focusing on growth at all costs.

More delivery companies need to follow Delivery Hero’s lead and start pulling out of marginal markets. Everyone in the industry is bleeding red because firms like Softbank simply put too much capital to work chasing relatively small regional markets. If Grab has, say, 50% market share in Singapore or another country, it could probably make money there. But as long as a ton of different companies are fighting for each customer and restaurant, it’s a no-win situation.

Grab’s Valuation Is Still Far Too Rich

Investors might be tempted by the fact that Grab’s share price is just above $6 and think that it is starting to become a bargain. But don’t let the low price per share fool you; it is still an exceedingly expensive stock.

Grab has a market capitalization of $22.8 billion, thanks to its huge outstanding share count. That’s a gigantic number for a company with less than $1 billion of annual revenues. Meanwhile its revenues actually sank in Q3 versus the same period a year earlier. Even if its business was profitable, and it isn’t, the stock’s sales multiple is awfully steep.

Moreover, the incentives that it gives to its drivers and customers together are roughly equal to all of its revenue. Without the incentives, much  of its business would probably disappear. Long story short, investors are paying a massive price for a small business with dreadful profitability metrics.

The Verdict on GRAB Stock

Grab has some of the worst financial results of any company I’ve reviewed over the past year. In the current climate, that’s saying something. Even amid a market full of dodgy SPAC, electric vehicle (EV), and penny-stock offerings, Grab has impressed me with its ability to burn  through investors’ capital very rapidly.

Grab is generating massive losses. Given the carnage we’ve seen among SPAC stocks, expect little mercy for Grab’s shares in the coming weeks and months.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.