Indonesia share sale contortion is necessary evil

BENGALURU, Nov 4 (Reuters Breakingviews) – Scant liquidity is a big problem when globally investors are running for the hills. Alibaba- (9988.HK) and SoftBank Vision Fund-backed Indonesian technology powerhouse GoTo (GOTO.JK) is facing a squeeze partly of its own making.

The initial public offering of the ride-hailing-to-online-shopping giant at a $28 billion market capitalization in April was a landmark deal on the back of relaxed listing rules. It was supposed to help deepen the country’s financial market by opening the door for other companies to follow. Now GoTo will have to manage a big contortion in the $570 billion stock market.

The company is talking to its pre-IPO investors to manage a secondary offering of its shares after a lockup period expires at the end of November. GoTo won’t sell any new shares as part of the process, but could oversee a deal worth up to $2 billion marketed to foreign private equity firms and sovereign wealth funds, according to Refinitiv publication IFR. It’s an unusual move.

A shallow domestic market is the driving force. The daily average trading volume of all local stocks was a little over $1 billion during the first half of this year, data from the Indonesia Stock Exchange shows. At a stretch, GoTo’s involvement might prevent a further price slump on the company’s current $15 billion market value. More likely, by mucking in, GoTo will be able to cherry pick long-term foreign investors ahead of a planned US listing expected by 2024.

It follows some IPO missteps. The company sold nearly $1 billion of stock at a multiple of 17 times forecast revenue for 2023. It pursued the lofty valuation, lapped up by enthusiastic domestic retail investors, even after its Southeast Asian rival Grab (GRAB.O) had a car-crash New York debut. It also followed Bukalapak’s (BUKA.JK) $1.5 billion IPO, an Indonesian record; the price promptly flopped and now stands two-thirds below its listing value.

Yet GoTo’s intervention, much like its decision to list in Indonesia before going overseas, will be a public service of sorts too. Another money-losing, middling e-commerce company, Blibli, has just priced its local public debut. Ensuring some order as lockups expire is important for the growing band of homegrown unicorns including digital bank Akulaku and fintech Xendit. The meddling in the secondary market looks like a necessary evil.

Follow @PranavKiranBV and @ugalani on Twitter

CONTEXT NEWS

Indonesia-based GoTo is working with its pre-IPO investors to explore a coordinated secondary offering of shares “in order to facilitate an orderly sale through the negotiated market” after a lockup period expires, the company said in a statement on Oct. 24.

The ride-hailing to e-commerce company is not selling any new shares as part of the process. The lockup period ends on Nov. 30, it added. GoTo was published on the Indonesian Stock Exchange in April.

Column by Pranav Kiran in Bengaluru, Una Galani in Mumbai. Editing by Antony Currie and Thomas Shum

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