Tech IPOs During Market Downturn

Updated: Aug 12



A large number of startup companies globally are planning to go public in the near future. These startups consist of various industries, namely e-commerce, fintech, artificial intelligence, and online transportation. Listing their companies on the stock market would allow them to receive a larger sum of funding compared to private equity investments through venture capital or hedge funds. This plan also aligns with venture capital's goal of leading startups to an IPO and eventually exit their position. Furthermore, the investing climate in which demands for technology stocks surge amidst the COVID-19 pandemic might be the perfect opportunity for startups to go public. According to an analysis by Tech in Asia, roughly 96 startups in China, India, and Southeast Asia are in line for an initial public offering within 2022. Around 49 companies are expected to raise US$30.79 billion or Rp458 trillion altogether. These companies aim to go public in the US, inspired by Sea Group's successful IPO which had a market valuation of at least US$120 billion (Rp1,7 quadrillion). Additionally, with Wall Street being the world's financial center and NYSE holding a market cap of US$26.2 trillion, the US is among the most sought-after market destinations. For all that, this trend doesn’t apply to every country in the mix. For instance, a majority of Indian companies would instead go public on their country's stock exchange. Additionally, Hong Kong is also becoming an increasingly demanded destination for Chinese companies compared to previous years.


The Indonesia Stock Exchange (IDX) reported that 45 Listed Companies are in the process of issuing rights as of August 1, 2022, with the finance industry dominating the line. The pipeline rights offer indicates the confidence of listed firms to use the Indonesian capital market as an alternate funding source, with a total sum of Rp36.9 trillion estimated to be raised through the rights issue. At least four potential issuers are now taking part in the IPO series, according to the e-IPO portal. The first is PT Hetzer Medical Indonesia Tbk (MEDS), whose number of shares offered reflects 20% of Hetzer Medical's total outstanding shares following the IPO. Second, there is the potential issuer PT Toba Surimi Industries Tbk (CRAB), a producer of processed fishery products, offering a maximum of 390 million shares with a nominal value of Rp50. Third, there is PT Pelayaran Nasional Ekalya Purnamasari Tbk (ELPI), which after the IPO releases 15% of the issued and paid-up capital. Lastly, PT Sari Kreasi Boga Tbk (RAFI), the franchisee of Kebab Turki Babarafi, released 30.3% of the listed shares. As a result, on Friday (5/8), more than 800 Listed Companies with shares were listed on the IDX. For four years running in 2021, IDX will have the newest shares listed on any ASEAN exchange. This accomplishment deserves praise and cannot be dissociated from the backing of the government, financial services authority (OJK), IDX, and other self-regulatory organizations (SRO) policies that aim to foster favorable capital market conditions during busy periods.


The overview of the current situation of companies that would like to enter an IPO has spread, in which some are already in the pricing stage. However, the emission price of each of the companies is still below Rp100 million. On the other hand, the current money used through an IPO is allocated for organizational expansion rather than to pay debts. In Indonesia, the rate of companies that want to expand their business through IPO strategically is still high, supported by the resilience of the Indonesian capital market amid global volatility. Director of PT Trimegah, David Agus, stated that the optimal performance of IHSG yearly is still positive, amounting to 4-5%, compared to Dow Jones which decreasing up to -10% Indonesia has become the most active IPO campaign in Southeast Asia, despite running in the middle of a weak IPO regional market throughout the second phase of 2022. E&Y reported 22 new issuers in Indonesia, gaining US$13 million. This data concludes the most in Southeast Asia regarding quantity and pool funds. E&Y Strategy and Transactions Partner, Sahala Situmorang, reported that the amount of IPO in Indonesia is fewer than the first phase of 2021 while the overall fund is significantly US$0.5 million higher. However, several recently-offered stocks have experienced an instability in the market due to the Fed’s interest rate hike. Summing up, companies growth and profitability became investors’ main consideration given the current market dynamics.


Sources:

Bisnis

CNBC Indonesia

Tech in Asia Indonesia


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