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GoTo delays IPO but it may not be worth the wait

  • Indonesia’s GoTo delays market debut by a week to 11 April

  • GoTo is raising US$1.1bn, which is close to the top end of the range – the final pricing values the firm at US$28bn

  • Scarcity factor as a rare Indonesian Tech play could drive its performance, but our concerns remain on the IPO pricing

GoTo delays IPO but it may not be worth the wait
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
31 March 2022
Published byTellimer Research

GoTo, Indonesia's ride-hailing and e-commerce company, has priced its IPO at almost four times the EV/Sales valuation of its main competitor. GoTo is raising US$1.1bn at IDR338 per share, which is close to the top-end of the range. The shares were shown to investors in the range of IDR316-346. The final pricing values GoTo at US$28bn.

The pricing was largely restricted to domestic investors. International investors were limited to 10% of the offer.

The listing has now been postponed by a week to 11 April. The pricing period was extended by three days last week.

IPO information

We continue to have serious concerns about the pricing of this IPO:

1. At US$28bn, GoTo has been priced 33% higher than its close competitor Grab's valuation in terms of EV/GMV. In terms of EV/Sales, GoTo is priced almost 4x higher than Grab.

EV/GMV Multiple

EV/Sales Multiple

Comparables: Baby Amazons

2. The market is impatient with companies that have a long runway to profitability. GoTo is likely to make operating losses till FY 24.

GoTo key metrics - USD Mn

3. The response to the IPO seems to have been lukewarm – the pricing was extended by three days. As mentioned earlier, the listing has been postponed by a week to 11 April.

In fairness to the issue, as we've pointed out previously, it does have the following mitigating features and may have strong domestic support for the following reasons:

1. Operationally, it is showing growth. ASEAN is one of the most prized regions in EM for tech growth. The gross transaction value (GTV) was IDR414tn in the 12 months ending 30 September 2021. This equated to 38% yoy growth.

2. The underwriter, CGS-CIMB will keep 7.8 billion shares, which may be used to stabilise GoTo's share price and limit any slump.

Nevertheless, investors should tread with caution.