Medan, Indonesia – When Indonesian e-commerce startup GoTo made its public debut this week, Christopher Panal Lumban Gaol, senior lecturer in business law at Santo Thomas Catholic University in Medan, felt a surge of pride.
“In the business world, Indonesia is known to be a consuming and not a productive country,” Gaol told Al Jazeera.
“So there was maybe a sense of euphoria when GoTo started trading. We don’t make our own products like cars, so online apps are something Indonesians can be proud of because we have a certain number of good models.
While GoTo appeared to defy expectations by launching a successful initial public offering (IPO) as tech stocks take a beating globally – even topping its own $26.2 billion valuation at 28.8 billion – the startup’s strong performance came as no surprise to market watchers in its home country.
Born of a merger between two Indonesian mega-brands, GoTo’s initial success was long overdue, analysts say, reflecting a confluence of regulatory changes, strong brand image and cautious investor research.
Shares of GoTo rose 23% in its local market debut on Monday, with the price per share reaching 412 Indonesian rupiahs ($0.029) minutes after trading began on the Indonesian Stock Exchange. Shares closed at 382 Indonesian rupiah ($0.027), up 13%.
“GoTo’s early success isn’t particularly surprising as it was formed by the merger of two massive brands,” Gaol said. “They already have their own established portfolios and they don’t have much competition either.”
The “super-app” follows a merger in May between transportation and food delivery company Gojek and e-commerce powerhouse Tokopedia. GoTo raised $1.1 billion for its IPO, making it a rare Indonesian “unicorn” – a private startup valued at over $1 billion.
“GoTo offers a kind of more complete ecosystem. They have ride-sharing services, fintech and also e-commerce,” Adinova Fauri, an economics researcher at the Center for Strategic and International Studies (CSIS) think tank, told Al Jazeera.
“They have huge prospects, not only because of the raw value, but also because of the network they have created. More and more small and medium-sized enterprises (SMEs) are joining the platform, which means more customers, more transportation needed and more transactions using GoPay.
According to public records, GoTo has approximately 2.5 million registered drivers and 14 million registered merchants. The company claims to have over 100 million monthly active users.
While the pandemic has been blamed for dampening investor enthusiasm for Southeast Asia’s tech scene, some industry watchers believe the crisis may have helped GoTo’s prospects.
“The pandemic has accelerated digital adoption in Indonesia,” Angelo Abil Wijaya, a consultant for a major international financial firm, told Al Jazeera. “More and more people are now more connected to the digital economy.
“GoTo, for example, has enabled millions of people to participate. Tokopedia has enabled many small and medium businesses in Indonesia to sell their products online and Gojek has enabled many people to work as drivers. Now, more than ever, it is easier for Indonesians to enter the digital economy and transact online.
Wijaya added that Indonesian consumers are becoming more comfortable with e-commerce while, at the same time, government programs and policies have boosted confidence, not only among investors, but also among young people who want to start their own business.
During a listing ceremony on Monday, Indonesian President Joko “Jokowi” Widodo said in a video message that he hoped “GoTo’s IPO will motivate our younger generations to inject new energy into the economic progress of Indonesia”.
Gaol agreed that the regulatory changes have helped give local contractors more confidence.
“Indonesia started off slow initially because regulations to accommodate startups didn’t exist properly,” he said. “They have now started to catch up, although some laws are still missing.”
GoTo has a current market value of around $32 billion, making it the third most valuable listed company in Indonesia. Among its investors are giants such as Alibaba, Google and the Japanese group SoftBank. Still, Fauri said it was too early to tell whether the super-app was redefining expectations in the region, especially since it has yet to turn a profit, according to its prospectus documents released in March.
“The market will still have to see a clear path to profitability going forward,” he said.
“We know from the prospectus documents that GoTo will still make losses in the next few years. Without a profitability plan, the future is likely to be tough. But we still have to wait and see.
According to public records, GoTo’s net loss last year was around US$520 million on sales of around US$174 million.
There are also cautionary tales. Bukalapak raised $1.5 billion in Indonesia’s biggest-ever IPO last year, before seeing sales drop 70% after its IPO. Shares of regional rival Grab also fell 70%. GoTo also saw its share price drop in the days following its debut, closing at 374 Indonesian rupiah ($0.026) on Wednesday.
Still, local analysts hope GoTo will fare better than its beleaguered rivals, especially given the country’s demographics. Indonesia is Southeast Asia’s largest economy, with a population of over 270 million, including a growing middle class.
“Indonesians love to spend their time online and that means they are spending money and consuming at the same time,” Gaol said.
“With this merger, GoTo can become the king of this market.”