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GoTo, the largest technology group in Indonesia which was formed in 2021 as a result of a merger between ride-hailing giant Go-Jek and the e-commerce firm Tokopedia, is all set to go public on the Indonesia Stock Exchange (IDX). The company aims to raise over $1.1 Bn. The price range for the IPO is set between IDR 316–346 per share, which could give an estimated market capitalisation of about $29 Bn. It is anticipated that the IPO will be one of the biggest milestones in the region for an internet company. However, this is considered to be a bold move, especially in times when most stock markets are facing turbulence.
Looking at the fate of one of the highly anticipated tech stocks of 2021, Grab, which is facing a continuous downfall, we try to see whether GoTo will follow a similar path?
GoTo’s Financials — Is the valuation justified?
GoTo Group provides a unique ecosystem that combines the need for on-demand, e-commerce, and financial services under a single umbrella through its Gojek, Tokopedia, GoTo Financial platforms. Given the broad range of services offered, GoTo’s ecosystem contributed to more than 2% of Indonesia’s GDP by addressing the needs of about two-thirds of the country’s household consumption.
With Pro-forma orders of approximately 2 billion in the 12-months ended 30 September 2021, the company has earned GTV 28.8 Bn during the period. As per the company’s reports, its total addressable market (TAM) in Indonesia is expected to grow significantly by 2025. Despite having a gross revenue of about $1 Bn on the year ending September 2021, GoTo is yet to achieve profitability. With the reported data, GoTo’s EV/Revenue multiple is estimated to be around 28. While its valuation is less than its competitor Grab’s valuation at the time of its IPO, there is no denying fact that GoTo is still highly overvalued. GoTo Group must learn from the tragic post-IPO performance of other tech companies so as to ensure stable results.
How are other Southeast Asian tech companies performing post-IPO?
GoTo’s IPO is sought to be one of the biggest IPO in Indonesia this year. The decision to go public at this time is surely a bold move as most of the financial markets across the globe suffer due to the Ukrainian crisis, along with sharp sell-offs in tech stocks and expectations of rising interest rates. Moreover, the performance of GoTo’s peers in Southeast Asia like Grab, Bukalapak, post-IPO have been disappointing. As a result, some investors are now contemplating GoTo’s prospects.
GoTo’s Singapore-based rival, Grab’s debut on the NASDAQ witnessed an immediate slump after a record SPAC which valued the company close to $40 Bn. Despite its huge market presence, the company still struggles to make profits. Grab’s shares have hit a low this month as the company reported an annual loss of about $3.6 Bn. As we mentioned in our previous article, Grab had highly overestimated its valuation and hence the decline was meant to be.
Another Indonesian e-commerce startup, Bukalapak had a great start on the IDX, soaring 25% on its debut. While the company was a big hit in the Indonesian stock market raising $1.5 Bn, these moments were short-lived as it started to dip a few days after the IPO. The company has now lost more than 74% of its value since its public listing. Singapore-based Sea Ltd, on the contrary, soared after its IPO in 2017 but has seen a decline in recent months. From an all-time high of USD 372.70 per share to its share price recorded at 93.70 (as of 15th March 2022), it has seen a decline of 74.85%.
Will GoTo shares see a similar fate?
The favourable Indonesian stock market is making the stakeholders hopeful of GoTo’s decision to go public in such turbulent times. With some of the existing shareholders agreeing on an 8-month lockup period, the IPO won’t see any sale of shares from existing owners. According to the prospectus, the company also plans on offering about a 10% stake sale outside of the domestic market. However, the dual listing will take time and will happen only after analysing the market dynamics once it becomes public.
It is very bold of GoTo to opt for public listing in times like these when tech stocks are facing sharp sell-offs. Additionally, high valuations with lacking profits may not turn out in favour of the company in the long run, as seen in the case of Grab. While GoTo stock may see a fine start on the IDX, the company’s valuation might be disturbed, as it goes public. Although the extent of variation is difficult to determine right now, it is still a risky bet.
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This article has been co-authored by Tamanna Kapur, who is in the Research and Insights team of Torre Capital.