GoTo’s Failed Price-Maintaining Mechanism

One of Indonesia’s largest and most prospering tech startup companies, GoTo, had just ended its shares lock-up period for its early investors on Wednesday (11/30). This lock-up period of 8 months following their initial public offering was agreed upon by early backers such as Alibaba Group and SoftBank Group with the intention of supporting the share price post-IPO by making sure none of these large institutional investors backed out from the firm. Typically with the period ending, it allows existing holders of GoTo to sell their shares back in the market. However, GoTo’s Chief Executive Officer Andre Soelistyo said there was no guarantee that the controlling share sale would occur. Based on the company's prospectus, at least 1.1 trillion series A shares do not belong to shareholders with multiple voting rights. The details are Garibaldi Thohir with 1.05 billion shares or 0.09%, GoTo Peopleverse Fund with 106.9 billion shares or 9.03%, and SVF GT Subco (Singapore) Pte. Ltd. as many as 103.1 billion shares or 8.71%. Then Taobao China Holding Limited as much as 104.7 billion or 8.84%, parties with less than 5% ownership of 745.6 billion or 62.96%, and the public as much as 40.6 billion shares or 3.43%. GoTo shares have been on a significant downturn since reaching its all-time high of Rp390 per share in June earlier this year. After the termination of the lock-up period on November 30th, GoTo shares plummeted to new record lows after record lows, down by 7% or the lower daily limit for eight consecutive times until Friday (12/9) positioned at Rp93 per share. This consequently means that the shares had gone down by approximately 75% since its initial public offering or wiping out around Rp300 trillion from the market.

GoTo received an assessment from analysts stating that the weakening trend was inseparable from the expiration of the lock-up period for GoTo's series A shares on November 30. The sentiment immediately triggered a massive sell-off of GoTo shares. VP & Head of Investment Research of Infovesta Utama, Wawan Hendrayana stated that opening of the lock-up period allowed relatively large shareholders to cash out. Wawan estimates that large investors carried out the sell-off by looking at GoTo's financial performance, which is still suffering substantial losses. GoTo's losses have swelled to Rp20.9 trillion until the third quarter of 2022. According to Lanjar Nafi, market researcher at BTPN, conveyed on Monday (12/5), GoTo’s revenue increased significantly in the third quarter for around 215% as well as their expenses, resulting in an increase in operating loss of around 118%. On the other hand, investor’s interest in buying GoTo shares is still low which pushes the price of GoTo shares to shrink further. According to Bloomberg, the sell-off after GoTo's IPO made GoTo shares the worst-performing technology stock among 11 technology and internet companies that raised more than US$500 million in IPO fundings this year. Furthermore, the severe global outlook and the collapse of tech startups led people to lose confidence even in GoTo. The expiration of the lock-up period and the sentiment caused by GoTo's recent layoffs encouraged firms that held GoTo shares on IPO to immediately exit their positions, which caused the shares to drop even further.

GoTo’s strained condition and substantially plummeting share prices caught the attention of financial regulators - impelling the management to conduct an incidental public expose. Despite the public expose being announced on Thursday (12/8), their shares continued to tumble even reaching Rp100 settling for a deeper all-time low. Along with the continued decline in GoTo's share price, GoTo's market capitalization has shrunk from their initial public offering's position of over Rp400 trillion to Rp 110 trillion as of Friday (12/9). The decline of GOTO also dragged down their institutional backers, such as TLKM and ASII, further worsening the movement of the IHSG. GoTo President, Patrick Cao conveyed on the virtual public expose that with the termination of the lock-up, the number of shares circulating in the market and transaction volume increases. This can be caused by several things, including early investors who entered at lower prices realizing profits. He also explained that there are other factors which contributed to the downfall such as time, seasonality, and external factors beyond their control, such as macroeconomic conditions, capital market performance, and tighter competition. Patrick ensures that the company will still focus on the overall performance through its products. In addition to push for profitability, he will improve efficiency and introduce new products and services to increase customer loyalty. GoTo is set to focus on their sustainable business growth and accelerate progress towards profitability to ensure a steady uptrend and protect the welfare of their shareholders as well as stakeholders.

Sources:

Bloomberg

CNBC Indonesia

Detik Finance

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