GoTo’s shares soared as much as 23% on their debut on the Indonesia Stock Exchange, becoming the third largest IPO in Asia this year.
The company’s stock finished its first day of trading with a 13% gain at 382 rupiah per share. Formed from the merger of Indonesian unicorns Gojek and Tokopedia, the combined entity managed to raise 15.8 trillion rupiah ($1.1 billion) from 300,000 investors, a record for the highest number of investors for an IPO in Indonesia.
“Despite global market volatility, investor interest has been strong, reflecting the rapidly growing demand in Southeast Asia for our on-demand, e-commerce and financial technology services, as well as confidence in GoTo’s position as the largest digital ecosystem in Indonesia,” Andre Soelistyo, GoTo Group CEO said in a statement.
GoTo also reached a market cap of 400.3 trillion Rupiah which makes it the fourth-largest listed company in Indonesia after telecommunication giant Telkom Indonesia.
The group reported a gross transaction value of 414.2 trillion rupiah in the 12 months ended September 30, 2021, a 62% jump from a year earlier. But GoTo is still operating in the red. The company posted a loss of 11.58 trillion for the first nine months of 2021.
Vivian Xu, a partner at ZWC Partners, an investor in GoTo, said that her firm is not too concerned about the company’s profitability given the current momentum. As an emerging market fund manager in Asia, the firm looks at China and Southeast Asia in parallel. From the firm’s experience investing in China, it has seen the emergence of super-platforms like Alibaba, JD.com and Pinduoduo.
“We understand that for internet companies, as long as it continues to provide values to users, they can create a very high stickiness and finally reached profitability,” Xu said in a virtual interview.
According to Xu, Indonesia has relatively lower rate of paid user penetration as well as ARPU (average revenue per user). Taking e-commerce as an example, listed companies from Southeast Asia, such as SEA Group’s Shopee, have ARPUs of about $5, whereas its Chinese counterparts like JD and Alibaba are seeing ARPUs in the range of $100-200.
Hian Goh, a cofounder of Openspace Ventures, the first institutional investor of Gojek in 2014, is also upbeat about GoTo’s growth potential in the future after its merger with Tokopedia. Goh says the company can now burn less money to acquire customers.
“Compared to its peers, GoTo has the strongest chance of turning into a cashflow and profit-driving company in the earliest time because of the combination of Gojek and Tokopedia,” Goh said in a virtual interview.
Analysts, on the other hand, have mixed views on the IPO. Nirgunan Tiruchelvam, head of consumers equity research at Tellimer Research, wrote in its latest report that the offering price of GoTo is at a premium because it’s priced over six times the EV/sales multiple of its close competitor, Grab.
Tiruchelvam also pointed out that the market is not patient with companies that have a long way to profitability, and GoTo is projected to record losses until 2024.