Asia Capital Markets Research

Platform companies have not had the best 2022, especially loss-making ones based in Southeast Asia. Amid global economic jitters, investors are souring on inflated tech valuations and stocks. We had thought Indonesia’s GoTo, with its laser focus on its massive home market and strong fundamentals, might be able to buck this trend, and at first it seemed the company might do just that. After all, its IPO was successful. But in recent weeks, the company’s share price has plummeted, mirroring the trajectories of its peers like Sea Group, Grab, Alibaba and Paytm.

Heading into GoTo’s IPO Monday, one could be forgiven for being a bit skeptical. Here was another loss-making platform company with a sky-high valuation and a lot of subsidy-driven digital services. If you’ve seen one, you’ve seen them all, right? Not necessarily, say investors. GoTo raised US$1.1 billion in a triumphant IPO on the Indonesia Stock Exchange. Shares rose up to 23% and closed the day 13% higher at 382 rupiah, valuing the firm at about US$31.5 billion.

Hong Kong’s IPO market has likely hit a nadir, with funds raised from new share listings plummeting 90% year-on-year in the first quarter. Just 11 companies went public on the Hong Kong Stock Exchange in the January-March period, raising a total of US$1.72 billion. It was HKEX’s worst performance since the first quarter of 2013.

Remember that SPAC boom in the U.S.? To be sure, it has slowed in recent months, but the Nasdaq and NYSE continue to attract some high-profile listings by special purpose acquisition companies, such as Grab’s December debut. It is a different story in Asia. Though Asian exchanges amended regulations last year to wave the way for SPACs, there have not been any blockbusters yet.

Why now? That is the question many analysts and investors are pondering as Indonesian platform company GoTo is pushing ahead with an IPO that seeks to raise up to US$1 billion at a US$30 billion valuation despite the poor performance of loss-making companies' shares in recent months. Like its Singaporean counterpart Grab, GoTo began as an Asian answer to Uber but has morphed into a super app leaning heavily on digital financial services to secure its future. And like Grab, GoTo has yet to turn a profit, spends heavily subsidizing users, and made investors wait a long time for an exit.

Amid a general digital finance boom in Indonesia, the nascent retail investing segment is growing fast. A proliferation of investment apps, usually with low minimum investments, is allowing a much greater proportion of the population to invest. Historically, the wealthy have dominated the country’s stock market. Indonesia’s newbie investors are not only interested in equities though; they are also increasingly keen on crypto. Many of Indonesia’ new retail investors are young people, with about 70% between the ages of 17 and 30, according to Indonesia’s central securities depository.

The success of Kakao Pay’s IPO comes as a relief in many respects. The Ant Group-backed South Korean firm’s shares more than doubled in their November 3 debut, giving it a higher market value than many incumbents – just as was the case with Kakao Bank’s IPO – and assuaging concerns that an ongoing regulatory crackdown on fintechs could stymie its steady ascent.

Hong Kong’s IPO market had a banner year through September, posting its best performance since 1980 on the back of a flurry of listings by Chinese firms. Up to 71 companies raised nearly US$36 billion on the Hong Kong Stock Exchange (HKEX) from initial stock sales and secondary listings. Seven of the 10 biggest listings were Chinese tech firms. However, most of the funds were raised in the first half of the year. In recent months, the market has slowed sharply amid a highly uncertain and restrictive regulatory environment.

2021 has been a banner year for Indonesia’s tech industry, from the strong performance of key industry players to fundraising in private markets to IPOs. Data compiled by Bloomberg show that companies in Southeast Asia raised a record US$4.9 billion from January to June. 23 companies listed shares on the Indonesia Stock Exchange (IDX) during that period, leading the region. The deal pipeline has remained active in the second half of the year as well. 

Online investing has rapidly grown in Indonesia in recent years, with the rise of a digitally savvy generation of middle-class consumers eager to maximize returns on their savings. The ascendancy of startup Ajaib, often compared to the U.S.’s Robinhood, reflects the online investing boom in Southeast Asia’s largest economy.

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