GoTo Group recouped most of its losses after revelations of a sale of stock by a co-founder ignited a 19% selloff, a dramatic swing that reflected concerns about the business prospects of a Southeast Asian industry bellwether.
Indonesia’s biggest tech firm plunged its most on record early on Monday after William Tanuwijaya disclosed he unloaded 332 million shares of the company, reducing his slice of the company to 1.72% from 1.77%. But GoTo recovered after analysts argued the selloff was overdone and not supported by fundamentals. It stood largely unchanged in afternoon trade.
Investors have pummeled GoTo this month after concerns mounted about the market environment in its main businesses of ride-hailing and e-commerce, dogged by stubbornly weak consumption and intensifying competition. GoTo had shed roughly 20% or $1.2 billion of value over five losing sessions leading up to Friday’s close. Despite regaining its footing Monday, the shares are still down about 50% from their November high, hit by foreign fund outflows from its home country.
The disclosure of Tanuwijaya’s action coincided with the completion of a private placement involving as many 17.05 billion new shares.
Some investors regarded the deal as a warning about an urgent need for capital, JPMorgan analysts wrote Monday. There’s also uncertainty over the regulatory environment in Indonesia, after the government outlawed e-commerce on social media, a move that dealt a blow to ByteDance Ltd.’s TikTok but also raised questions about its approach to internet innovation.
“There is some misperception that the Non Preemptive Right Issue is seen as a sign of weakness,” analysts including Henry Wibowo wrote in a brief research note, maintaining an overweight rating on GoTo.
Read more: Indonesia’s GoTo Cuts Loss Forecast as Cost Curbs Pay Off
What Bloomberg Intelligence Says
GoTo’s co-founder selling shares shouldn’t impact the company’s goal to break even in 4Q. Adjusted Ebitda appears on track to turn positive in 4Q after a sixth consecutive improvement in 2Q amid lower staff and marketing costs. William Tanuwijaya’s 0.05% selldown to a 1.72% stake involved series A shares, while his holding of B shares, which have more voting rights, was unchanged.
- Nathan Naidu, analyst
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GoTo in August cut its 2023 loss projection after staunching some of the bleeding in the second quarter, taking it closer to a goal of getting into the black after an era of costly expansion.
Patrick Walujo took over as chief executive in June and is now carrying out his predecessors’ campaign to shave losses by cutting jobs, curbing promotional spending and tightening expense controls. Like rivals Grab Holdings Ltd. and Sea Ltd., the Indonesian firm is trying to generate cash after years of rapid growth.
--With assistance from Soraya Permatasari and Olivia Poh.
(Updates with share action from the first paragraph)