Jakarta. Since e-commerce unicorn Bukalapak’s blockbuster initial public offering earlier this month, its share prices surged to upper band movement for the first two days before continuously plunging to the lower bands. Still, experts remain firmly enthusiastic over Indonesia’s first wave of tech IPO.
Bukalapak’s IPO, the biggest the Indonesian Stock Exchange (IDX) had ever witnessed, raised an unprecedented Rp 21.9 trillion ($1.5 billion) in capital and attracted around 150 institutional investors and over 100,000 retail investors on its first trading day.
The success of the offering is no surprise. For the past year, there has been high speculation over the IPO of three e-commerce companies, all of which have become much-loved household names with unicorn or decacorn status. The two tech darlings besides Bukalapak are Traveloka, a travel-booking site, and GoTo, a new merger between ride-hailing app Gojek and the online marketplace Tokopedia.
GoTo and Traveloka are expected to offer shares in the third quarter of this year. Hoesen, the capital market supervision chief executive at the Financial Services Authority (OJK), said three tech conglomerates with a total valuation of around $ 21 billion were ready to list their share on the exchange.
John Teja, the president director of securities company Ciptadana Sekuritas, said Bukalapak's record-breaking IPO provided good momentum for other tech startups planning to go public.
“In the short-term, new tech stocks will still be very sensitive compared to conventional stocks,” he said. “We’re not looking at a short-term win of one to three years, but ten to twenty years.”
Teja’s prediction is based on several things. Digital infrastructure and the number of mobile users in the country are still growing. High-growth tech stocks will also be especially attractive to millennial investors, who he deems to have more aggressive investment strategies. Millennials currently make up more than 80 percent of Indonesia’s retail investors demographic.
He also likened Indonesia’s upcoming IPO rush to the dot-com bubble in the US during the late 90s, from which several tech giants such as Amazon emerged as a public company and dominated markets after a few decades.
“Therefore, the next ten years could be a golden decade for the technology industry and capital market for tech and digital companies in Indonesia,” John said.
Trickle Down Effect
Raditya Pramana, a partner at Venturra Discovery, the seed investment arm at Southeast Asian venture capital firm Venturra Capital, said that the entry of big tech companies into the capital market would have a “trickle-down” effect on the rest of Indonesia’s tech industry.
“Many companies, even ones below $ 100 million in market cap or soon-to-be unicorns, are becoming confident to go public,” he said. “There is enough demand in Indonesia that IDX is slowly becoming a very credible way to exit for these startups. It was never a feasible exit strategy before.”
The latest IDX figures show that during the first five months of this year alone, 1.49 million new investors entered the capital market. This May, there are 5.37 million capital market investors, a 38 percent increase since last year.
Institutional investors have also voiced their confidence in Indonesia’s tech markets. Multipolar, a listed technological company part of Indonesian conglomerate Lippo Group, recently unveiled its plans to become a “tech super holding,” including its investment in Bukalapak.
“We are delighted to participate in a sector that has a big influence on the Indonesian economy," said the company’s chief executive officer, Adrian Suherman, shortly after Bukalapak’s IPO.
But these IPOs will have an even wider impact on the country’s tech ecosystem, not just investors in the capital market.
Angel investors and venture capitalists are increasingly interested in investing in Southeast Asian companies, especially Indonesian companies, according to Venturra Discovery's Raditya.
“All of the big tech IPOs that are happening in Southeast Asia, a lot of them are using Indonesia as the main narrative,” he said. “These blockbuster IPOs are too big to go unnoticed.”
He continued: “The sentiment towards Southeast Asia is higher than ever before, and it’s such an exciting time because it encourages international investors to take a closer look into not just big tech IPOs but dig deeper into what’s happening on the ground.”
He was referring to the large market potential yet to be explored, wherein in the future, not just SMEs but also warungs (street-side vendors) could be available on mobile apps.
Bukalapak’s listing was not free of controversy, as the decade-old company reported a Rp 1.3 trillion year-on-year loss in 2020. According to stock market analyst Reza Priyambada, the company's main challenge now was “to perform” and increase its market share.
Data from digital intelligence provider Similarweb shows that in the first quarter of 2021, among Indonesia’s top-performing online marketplaces, Bukalapak came third in traffic share (7.79 percent) behind Tokopedia (33.1 percent) and Shopee (29.8 percent).
Reza said: “Looking at losses, it’s natural that e-commerce businesses have more operational costs due to the promotions. You can find laptops there for half their store price, plus free shipping. That can only be funded from promotion and subsidy.
In the future, with this additional IPO fund, investors will look at how effectively they can use it to finance business development and enlarge their market share.”
The performance of online marketplaces would be susceptible to Indonesia’s macroeconomic fundamentals, Ciptadana's John said.
Considering the pandemic-related business restrictions that began in July, Teja predicted Indonesia’s third-quarter performance might not be as good as its previous quarter.
“If the economy slows down, there will be a definite correction on tech stocks,” he said.
Nevertheless, experts' enthusiasm towards Bukalapak's long-term performance remains very high. As Raditya put it: “Everyone is rooting for Bukalapak, even their competitors.”