Investors looking to build on the burgeoning populations and disposable wealth of Southeast Asia will have a very attractive option as of this month: GoTo, which is due to start trading in Jakarta on April 11.
What started life as a moped-hailing service has morphed into a superapp operator. It's the product of the merger last year of e-commerce site Tokopedia with the ride-hailing site Gojek, leading to what I joked at the time is the world's first "unicorn with two horns."
The combined entity is currently in its offering period, which ends Thursday as it runs April 1-7. The shares are pricing at 338 rupiah per share, meaning the company will raise the equivalent of US$1.1 billion and have a market capitalization of around US$28 billion when it starts trading.
Officially known as GoTo Gojek Tokopedia, the company will start trading on the Indonesia Stock Exchange under the ticker GOTO. The company did adjust its offering size down from 48 billion to 46.7 billion shares, wary of the poor recent performance of Southeast Asian tech stocks amid global instability.
We'll soon see how it performs as a listed company. I have a bit of a beef with how first-day trading is reported in the financial media. Yes, it shows there is very strong demand for a company's stock if it shoots higher. But that's not a successful offering. It means the company and its investment bankers left a lot of money on the table that should have been raised by the company, but was lost because the offering wasn't priced efficiently.
Local brokerages Indo Premier Sekuritas, Mandiri Sekuritas and Trimegah Sekuritas Indonesia are joint lead underwriters of the initial public offerings.
GoTo recently made a nice gesture of support for its drivers, saying this week that it will give shares in the company to its long-term jockeys. Anyone who registered as a "driver-partner" from 2010 to 2016 will get 4,000 Series A shares. Drivers who joined from 2017 to February 2022 can get 1,000 Series A shares. They'll have an eight-month lockup, while drivers in Vietnam and Singapore will just get cash in order to avoid any securities regulation snafus.
Anyone who wants to be a billionaire, by the way, should just translate their wealth into rupiah terms. The shares that the veteran drivers receive will make them local currency millionaires, at 1.35 million rupiah. But with US$1 buying you around 14,400 rupiah at current exchange rates, they're equivalent to US$94. GoTo has set aside US$20 million for the program.
On the go, literally
Why do I like GoTo? The company burns through cash and produces losses, so its financials must be watched. But it has become the dominant superapp in the world's fourth-largest country by population thanks to Indonesia's 278 million people, and it aspires to corner Southeast Asia, too, which takes that tally to a 680 million population pool.
Indonesians are generally young and increasingly mobile, literally and in the way they do business. A decade ago, more people lived in the paddyfields and mountain forests of Indonesia's 17,000 or so islands. Now, nearly 57% of that massive population lives in the big cities, the megalopolis of Jakarta as well as nearby Bandung and Bekasi, and the port city of Surabaya. Collectively, they make Java the most heavily populated island in the world. There's around 6 Javans for every Aussie
They're mobile in the way they do business in that many bypassed the desk-and-desktop workplace revolution we went through in the West and skipped straight to laptops and especially mobile phones. Two-thirds of Indonesians have a mobile phone, a figure dragged down by the provinces and that rises to three-quarters in Jakarta (and feels like 100%).
GoTo basically ticks all the boxes of the way Indonesians live today. GoRide and GoCar get you there, GoFood and GoSend bring you stuff, GoShop and GoPay let you fund it all. On the e-commerce front, Tokopedia is the most-clicked site in Indonesia, though it's in a hard-fought battle with Shopee, the Sea Ltd. (SE) subsidiary run from Singapore, as well as homegrown rival Bukalapak (IDX:BUKA) and the Southeast Asian insurgent now owned by Alibaba Group Holding ( (BABA) and HK:9988), Lazada.
Bukalapak's stock sale has not been a good precedent. Its shares have fallen 56.5% since listing last Aug. 6 despite their first-day bounce of 24.7%, when they triggered a circuit-breaker halt inside an hour. Bukalapak set an all-time low of 258 rupiah in mid-March. Meanwhile, the Jakarta Composite Index has advanced 14.5% since BUKA's debut.
Bukalapak remains stuck in fourth place behind Tokopedia, Shopee and Lazada. CEO Muhammad Rachmat Kaimuddin resigned in December, becoming a technology sustainable-development adviser to the government. He had replaced the three Bukalapak co-founders, who had already left. Sales continue to leap and it is narrowing losses, but not enough to win over retail Indonesian investors.
GoTo should have more strings to its bow, although it also continues to lose money. It has branched out into financial services, targeting the 55.5% of the population that is without a bank or under-banked, and has strong mindshare as the "killer app" for many millennials and Gen Z Indonesians. The company's entire universe can serve around two-thirds of the household economy in Indonesia.
It's a brave time to list. Sea Ltd. has seen its New York Stock Exchange-listed shares tumble 44% so far this year, while Nasdaq-listed ride-hailing and food-delivery rival Grab Holdings (GRAB) , which listed via a special purpose acquisition company (SPAC) in December, has descended 49%. Bukalapak recorded the vast share of its share losses in last year's fourth quarter, so it's down "only" 12.7% in 2022. By listing at a tough time, GoTo should be selling into the depths of the market. Its Southeast Asian expansion should promise longer-term gains.
GoTo would be the third-largest listing in Asia to date this year. The US$1.1 billion it is raising sits behind only Korean battery maker LG Energy Solution (KR:373220) and its US$10.8 billion IPO in January and Chinese solar power equipment maker Jinko Solar (SH:6882233), which raised US$1.6 billion in January in Shanghai. (Jinko Solar is, confusingly, the main operating business of New York listed JinkoSolar Holdings (JKS) .)
Although it's a bigger company than Bukalapak, GoTo is raising US$500 million less than Bukalapak. It had originally indicated plans to list both in Jakarta and New York, so an ADR offering later isn't out of the question. It raised US$1.3 billion in a financing round through November that included heavy hitters such as the Abu Dhabi Investment Authority, Fidelity International, the Alphabet GOOGL operating business Google, Singapore government asset manager Temasek, and Tencent Holdings (TCTZF and HK:0700), the owner and operator of the Chinese superapp WeChat.
It will be the stability of its long-term institutional holders that will determine the success of the offering. Short-term retail traders leapt on the Bukalapak "stonk" and sent it south in a hurry on social media when they grew unhappy. GoTo will need to ride out that kind of trading.
Last week, I outlined my favorite stock plays in China for the rest of the year. XPeng ( (XPEV) and HK:9868) and Nio (NIO) both make electric cars, with new models on the factory conveyor belt and expansion plans in Europe. Li Auto ( (LI) and HK:2015) makes up the triumvirate of U.S.-listed Chinese EV manufacturers, but relies for the moment on its highly successful SUV, a smaller product stable than the other two.
Whereas Big Tech has come under fire in China, where Chinese President Xi Jinping has championed "common prosperity" and questioned the motives and merits of billionaire entrepreneurs, the electric-vehicle sector meshes perfectly with the state agenda of reforms. China is by far the world's largest importer of oil and also by far its largest polluter, so taking gasoline-fired engines off the road is a top priority.
GoTo gives you a stock option that suffers none of the regulatory uncertainty buffeting China plays. Monday will give us its first life as a public company. If its bankers price the offer right, they'd be a small first-day bump.
