JAKARTA, Oct 22 (Bloomberg): Indonesia’s largest tech company GoTo Group is in talks with its major owners for a controlled sale of roughly $1 billion of their stakes, aiming to avoid a potential stock crash when a lock-up on their holdings ends next month.
The ride-hailing and e-commerce provider is gauging the interest of early backers including Alibaba Group Holding Ltd. and SoftBank Group Corp. for a managed sale of some of their shares to new investors, according to people familiar with the matter. The plan is part of an effort to prevent a potential drop in GoTo stock price that could occur if many investors sell shares when a lock-up period expires on Nov. 30, the people said.
GoTo has also held discussions with some investors to get them to commit to holding their shares for a further period of as long as six months, said one of the people, who asked not to be identified because the matter is private. The Jakarta-based company is in the early stages of talks with the investors and the price levels for any deals are subject to negotiations, the people said. Deliberations are ongoing and GoTo hasn’t made any final decisions, they said.
Shares of GoTo were little changed at 11:11a.m. in Jakarta, paring earlier gains.
The regional tech giant, which has a market value of about $16 billion, is trying to avoid a situation where a large part of its backers would seek to cash out at the same time. Many major shareholders agreed to hold to their stakes for at least eight months following the company’s initial public offering in late March.
"GoTo’s plan to manage share-price volatility, by engaging early investors such as Alibaba and Softbank to sell down their shares, could help prevent a sharp correction,” said Nathan Naidu, an analyst at Bloomberg Intelligence, in a report Friday.
In late June, Chinese artificial intelligence software maker SenseTime Group Inc. slumped as much as 51% in Hong Kong trading after a lock-up of its shares expired following its December IPO.
About 1 trillion GoTo shares, or more than 90% of the total outstanding, become eligible to be sold starting Nov. 30. Still, that includes holders such as GoTo’s employee fund that are unlikely to sell. Alibaba holds about 8.8% of GoTo, and SoftBank’s stake is about 8.7%.
GoTo has engaged Citigroup Inc. and Goldman Sachs Group Inc., along with local advisers, to help with managing the potential selldown by existing shareholders, the people said. Representatives of GoTo, Citigroup, Goldman Sachs and SoftBank declined to comment. Alibaba didn’t respond to a request for comment.
Formed via a merger of ride-hailing provider Gojek and e-commerce firm Tokopedia, GoTo raised US$1.1 billion in one of the world’s largest initial public offerings this year. The share sale boosted the value of stakes of China’s Alibaba and SoftBank’s Vision Fund to almost US$5 billion combined.
After an initial surge following the debut, GoTo shares have pared gains to now trade about 40% below the IPO price. Still, cashing out after the lock-up expires could provide many investors a much needed boost this year amid a global decline in tech stocks.
Even after the stock-price decline, GoTo enjoys a high valuation which Bloomberg Intelligence’s Naidu called "unsustainable.”
The company’s enterprise value is about 14 times its estimated 2023 sales, well above the 2 times that e-commerce and food-delivery peers are valued at on average, Naidu said.
GoTo is among South-East Asian consumer-internet companies that are adding users at a rapid clip but has yet to generate a profit.
It is a leading internet company in Indonesia, a country of more than 270 million people whose mobile-savvy consumers are shopping on Tokopedia’s platform and ordering rides and food via Gojek’s app. - Bloomberg
