The IPO of GoTo, the Indonesian digital ecosystem platform, bears a close look. It is a rare example of a fintech IPO going up instead of down in recent months and it speaks to the potential for payment services in Indonesia. It also has some structural and social significance.
It was a bold call to go ahead with the float of the Indonesian startup, a merger of Gojek and Tokopedia, at a time when tech stocks and digital payments systems have been cowed globally and in Asia. Alibaba, for example, which is one of the biggest shareholders in GoTo, is down 58% in the past 12 months; SoftBank, the other biggest backer, is down 46%. And Bukalapak, another Indonesian e-commerce company that completed the country’s biggest-ever listing last year, is down 70% since launch.
Against that backdrop, the 14% climb in GoTo’s stock on its first day of trading, on Monday, was welcome news not only for the company and its shareholders but the consortium of local bookrunners: Indo Premier Sekuritas, Mandiri Sekuritas and Trimegah Sekuritas Indonesia. International houses, including usual Indonesia leaders Credit Suisse and JPMorgan, didn’t get a look in.
The deal represents an interesting combination of inclusivity-amped local fervour and the biggest of big-name anchor investors
The $1.1 billion deal wasn’t a total triumph: it sold fewer shares than expected, 46.7 billion instead of a planned 52 billion, though it priced towards the top of the range at Rp338 apiece. Those are curious numbers: Rp338 is less than two-and-a-half US cents, which is why you have to sell nearly 50 billion shares to get a deal away.
But it was in several respects a landmark. For a start, it was the first deal to try out the new rules on multiple voting rights, introduced by Indonesia’s Financial Services Authority, known locally as the OJK, in December.
It is not too big a reach to suggest that this rule exists specifically because of GoTo. Dual-class shares frameworks are controversial from a corporate-governance perspective, because by definition they are unequal, giving some shares more voting power than others. The model exists to help founders keep control of their companies, even if they no longer hold a majority of the equity.
Tech companies tend to insist upon them, having become used to them in US startup listings, and Indonesia is certainly not the first exchange to compromise its values to appease potential listings: Hong Kong did so after missing out on the Alibaba float, for example. Indonesia changed its laws to try to attract the country’s tech start-ups to list on the Indonesia Stock Exchange, IDX. Apart from boosting the capital markets, Indonesia also understands that younger people tend to engage most closely with technology stocks.
Consequently, the domestic listing of GoTo was something of a triumph for the IDX and OJK, and GoTo Group chief executive Andre Soelistyo made a point of thanking those institutions and the government “for their support during the IPO process, and for their continued commitment to the growth of Indonesia’s digital economy”. The presence of Airlangga Hartarto, Indonesia’s coordinating minister for economic affairs, at the listing ceremony in Jakarta, alongside OJK chair Wimboh Santoso and IDX president director Inarno Djajadi, was significant.
They will also have been pleased that GoTo didn’t follow the special-purpose acquisition company (Spac) route taken by southeast Asian peer and competitor Grab.
Another notable element of the deal involved inclusion, a priority for the Indonesian government. Gojek, from the outset, was all about empowerment of the unbanked and the forgotten, so the company implemented the Gotong Royong Share Program to allow drivers, merchants, consumers and employees to take part in the IPO. Soelistyo called it “one of the most inclusive share ownership programs in the world today” at the listing ceremony. GoTo says 300,000 investors took part in the float, the highest number ever on the IDX. This explains why the price per share is so low, so almost anyone can buy in.
It’s easy to see why investors have been attracted to GoTo’s demographic story. Indonesia is southeast Asia’s largest economy, with a GDP of over a trillion dollars and a population of 274 million, with a young and tech-savvy tilt to it. GoTo is a useful play on that story, and some of its numbers – though not all – reflect that: it has more than 55 million annual transacting users, 2.5 million registered driver partners and 14 million registered merchants, all as of September 30. It had pro forma gross revenue of IDR15.1 trillion ($1 billion) to that date, up 56% compound annual growth rate (CAGR) from financial 2018 to 2020, and pro forma gross transaction value of IDR414.2 trillion ($28.8 billion), which is up 46% CAGR during the same timeframe.
Cross-pollination
None of this means profitability; neither GoJek nor Tokopedia were profitable when they merged – and they’re still not now. What it does have, though, is a plan: cross-pollination among its consumers, merchants and drivers; expansion not just in Indonesia but in Singapore and Vietnam; investment in technology and infrastructure, including the transition towards electric vehicles; and generally digging even deeper into people’s everyday lives as e-commerce platforms generally do, with loyalty and reward programmes, deeper financial services offerings and more merchant services.
The deal represents an interesting combination of inclusivity-amped local fervour – not just retail but an almost sub-retail constituency of motorbike delivery workers and local store staff – and the biggest of big-name anchor investors. Apart from Alibaba and SoftBank, the company is backed by Tencent, Alphabet and three sovereign wealth funds: Abu Dhabi Investment Authority, GIC and Khazanah. It is interesting to see such a well-backed name deciding that it needed no international banks in its joint lead manager group.
All will be pleased at the initial reception. Now to see if, unlike most of its equivalents around the world over the last six months, it can keep that valuation up.
