The company, which is backed by Singaporean sovereign wealth fund GIC and Microsoft among others, is expected to raise Rp 21 trillion (US$1.5 billion) in an IPO that is oversubscribed four times, as reported by Kontan based on unnamed sources. The offering is set to be priced at the upper end of the Rp 750 to Rp 850 range announced earlier.

On June 24, the company estimated its valuation would reach $4 billion to $5 billion at the IPO, far above the current $2.5 billion. More than 25 billion shares will be offered to the public from July 27 to 30, Bukalapak announced on Tuesday.

MNC Asset Management analyst Edwin Sebayang said the company might be overplaying its hand. He opined that investors who understood the company well would exclude it from their long-term investment portfolio as no dividends could be expected. He predicted that investors would still seek to buy it for short-term gain, capitalizing on market hype.

In 2020, he said, the company booked a net loss of Rp 1.34 trillion, which took the price-to-earnings ratio far into negative territory.

Meanwhile, he said the company’s equity of Rp 1.6 trillion at the end of 2020 meant the price-to-book value (PBV) was more than 54, making the stock overvalued.

“I would not recommend it. The company is not as [strong] as we imagine. Should anyone want to buy it, they have to prepare for the risk,” Edwin told The Jakarta Post on Monday.

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Edwin said that, due to the nature of its financial report, Bukalapak relied on unconventional indicators to determine its valuation, including gross merchandise value (GMV) and total processing value (TPV). However, he said, the valuations may not live up to expectations created by these indicators, as the company’s current performance lagged behind those of its peers.

Bloomberg Intelligence, in an analysis published on July 19, revealed that Bukalapak’s enterprise value to forward GMV would reach 1.5x, exceeding that of its local rivals Tokopedia at 0.5x, Lazada Indonesia at 0.7x and also Chinese e-commerce giant Alibaba at 0.4x.

Bloomberg also estimated the Bukalapak enterprise value to forward gross sales value at 49.6x. The figure exceeds global competitors like Singapore-based Sea Ltd. at 16.4x, Singapore-based Grab at 13.2x, United States-based Amazon at 7.8x and Alibaba at 4.0x.

Meanwhile, Edwin said, the data simply did not add up. Bukalapak’s GMV was only the fourth-largest in 2020 at $3 billion, behind Shopee’s $14.2 billion, Tokopedia’s $14 billion and Lazada’s $4.5 billion, according to Singapore-headquartered Momentum Works, which assesses tech ventures in emerging economies.

Its market share is the fourth-largest in Indonesia’s e-commerce market. In 2020, its portion was only 7 percent, behind Shopee’s 37 percent, Tokopedia’s 35 percent and Lazada’s 11 percent, according to Momentum Works.

A recent report by e-commerce aggregator website iPrice ranked Bukalapak third in terms of monthly web visitors in the first quarter of this year with 34.17 million visits, only a third of Tokopedia’s 135.07 million and Shopee’s 127.4 million visits.

“Based on that, it is impossible to justify [its valuation],” Edwin said.

Market observer Reza Priyambada, meanwhile, noted that there were many ways to estimate valuation and said Bukalapak would have to prove its valuation through its performance in the years to come.

“The market can still assess [the company’s] performance going forward. For now, the company may be booking a net loss, but it could still grow and meet market expectations,” Reza told the Post on Monday.

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Reza said that, so far, the company had shown several signs pointing to an improving performance. Citing the company’s financial statement, he noted that Bukalapak’s net losses had shrunk by more than 52 percent in 2020.

The company, he said, had also increased its revenue over the past three years. In 2020, it rose by 25 percent to Rp 1.35 trillion from the previous year. Meanwhile, its sales and marketing expenses had fallen by more than 34 percent to Rp 1.51 trillion.

He said there were many things Bukalapak could do, from reducing expenses to ending promotional pricing once it had a stronger grip on the e-commerce market.

However, that would not be easy, he added, as the company still had a long way to go to catch up with its competitors.

Bukalapak declined to comment on doubts about its valuation. Instead, it directed the Post to Tuesday’s press release saying it had obtained an official statement from the Financial Services Authority (OJK) to offer its shares to the public after the book-building process.

However, in an earlier statement from July 9, the company highlighted its strength within the micro retail market, both online and offline:

“We believe that as an all-commerce digital ecosystem, Bukalapak is capable of becoming one of the best-performing public companies. By combining our offline and online businesses, I believe Bukalapak will reach optimum growth,” Bukalapak president commissioner Bambang Brodjonegoro said.