Equity Analysis /
Indonesia

GoTo: IPO could unravel more quickly than the market expects

  • GoTo shares are down 20% since the IPO on 11 April

  • The stock could now fall further as CGS-CIMB, the stabilising agent, has exhausted its quota

  • We reiterate our Sell recommendation on GOTO IJ due to its poor cash position and unjustified premium to peers

GoTo: IPO could unravel more quickly than the market expects
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
4 May 2022
Published by

GoTo listed on 11 April. The IPO proceeds were US$1.2bn, valuing the company at US$29bn. But since going public the shares are down 20%.

We reiterate our Sell recommendation with a target price of IDR221. This is one of our 5 key calls for May.

Three factors support our view that ongoing weakness lies ahead:

1) CGS-CIMB, one of Southeast Asia's largest brokers, has been engaged as the stabilising agent for the IPO. CGS-CIMB has been issued 6.1bn shares, which can be used to stabilise GoTo's share price and contain any slump. This was part of the greenshoe option.

CGS-CIMB has now exhausted its quota. Last Friday, a filing to the Indonesian Stock Exchange (IDX) showed that the greenshoe option has been exhausted.

2) GoTo's investors include Abu Dhabi Investment Authority (ADIA), Google, SoftBank Group, Temasek, Tencent and Fidelity International. These investors form the core of the pre-IPO Series A investors.

The pre-IPO Series A is subject to a lock-up of eight months, and this represents 90% of the enlarged capital.

Therefore, the Series A shareholders could start selling heavily in seven months' time.

The Series B investors are bound by a 2-year lock-up period. This represents 4% of the enlarged capital.

3) GoTo is positioned to ride Indonesia's surging digital economy. However, GoTo’s expensive valuation is unjustified and its net cash position is poor cash compared with rivals Grab and Sea.

And despite the sell-off since the IPO, GoTo is still priced at a vast premium to Grab.