After anticipation and delays, GoTo, the blockbuster result of merging ride-hailing giant Gojek and e-commerce platform Tokopedia, is scheduled to make its leap onto the Indonesian Stock Exchange on April 7. Billions of dollars, not to mention national pride, hinge on GoTo’s success: It’s everything from a bellwether for investor appetite to the poster child of homegrown Southeast Asian tech.
“GoTo is Indonesia’s face,” Vendy Sutedjo, former equity analyst at BNI Asset Management, told Rest of World. “It has to be successful.”
The ideal time to tap public markets might have passed, but there’s urgency to list as interest rate rises loom. GoTo, which raised $1.3 billion in a pre-IPO funding round just five months ago, has slashed its target valuation from $40 billion to a still-aggressive $28.8 billion. But it’s having a hard time convincing investors, analysts and industry sources told Rest of World. On March 21, the company announced that it would extend its bookbuilding period, a process that determines the stock’s pricing, by three days, and usually signals lower-than-expected demand. GoTo maintained that the purpose was to allow people on their platform — employees, merchants, consumers, and driver-partners — more time to take up shares under a specialized program.
It’s not only GoTo and its investors’ futures riding on this IPO. Some believe that a smooth listing could spur investments for local startups if it presents a good exit case study.
When the company closed its pre-IPO round in November, there was cautious optimism around Indonesia’s handling of Covid-19, until the Omicron variant emerged to dampen market sentiment again. “Should have been last year,” Christine Natasya, research analyst at Mirae Asset Sekuritas Indonesia, told Rest of World, referring to the listing.
The clock is ticking for the company to catch any remaining enthusiasm. “I believe they rush[ed] their listing,” said Harry Su, managing director of Jakarta-based financial advisory group Samuel International. “To have it later could mean souring sentiment from investors on the back of higher interest rates.”
Globally, tech IPOs have overwhelmingly underperformed in recent months, and markets fell in the first quarter of 2022, with jitters deepening on Russia’s invasion of Ukraine. GoTo has also seen losses widen during the pandemic. Investors are aware that e-commerce platform Bukalapak’s market cap has dropped by two-thirds since going public last year, and that Grab, the other regional tech giant, had a disastrous opening day, plunging by nearly a quarter when the ride-hailer opened on Nasdaq in December. Last week, the parent company of payments unicorn Kredivo postponed its U.S. SPAC (special-purpose acquisition company) listing.
To keep pace with the rise in interest rates by the U.S. Federal Reserve, the company must move quickly to list. A rate rise in the U.S. typically signals that investors reduce their flows into emerging markets, which would dampen the appetite for a listing in Jakarta. The Indonesian central bank is also expected to follow, making it more attractive for local investors to keep their cash in the bank, rather than invest it in the stock market. Finally, higher rates also mean higher funding costs, which could hurt loss-making tech companies like GoTo that depend on a continued stream of funding.
Samuel International has advised its customers to reduce their investments in interest rate-sensitive sectors, particularly tech startups and unicorns. “It is so unfortunate for GoTo to choose an inappropriate moment for [an] IPO,” the firm’s strategist Lionel Priyadi said in a note to clients.
GoTo sees it differently. “Our success in carrying out an IPO during this time would be a testament to the strength of our business, as well as demonstrating the strength of the Indonesian capital market,” R. A. Koesoemohadiani, GoTo’s corporate secretary, said in a message to Rest of World.
GoTo plans to use the fresh funds for working capital — 30% for the group, 30% for Tokopedia, 25% for GoPay, and 5% each for its subsidiaries in Singapore and Vietnam, according to the prospectus. In the document, GoTo highlighted impressive numbers comprising its giant ecosystem — 2.5 million driver partners across Indonesia, Singapore, and Vietnam, about 14 million merchants and 55 million consumers. It processed nearly 2 billion orders and posted over $28.8 billion in gross transaction value in the twelve months ending on September 30, 2021.
Buried deeper in the prospectus was their losses, projected to swell to $1.6 billion in 2021, and $2.2 billion at the end of this year. Grab, GoTo’s fiercest rival, recorded a net loss of $3.6 billion in 2021, widening 24% from a $2.75 billion loss in 2020.
GoTo also plans a secondary offering by the end of 2023, eyeing either the New York Stock Exchange, Nasdaq, Hong Kong Stock Exchange, Singapore Stock Exchange, or London Stock Exchange, according to its prospectus. The IPO in Jakarta could be useful for the company’s prospects of being included in major stock indexes, which would bring passive investors into the company who buy into indexes rather than individual stocks, Su said.