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Alibaba’s new GoTo commitment addresses investor concerns
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libaba, one of GoTo’s largest investors has confirmed its intention to remain a long-term shareholder of the Indonesian tech company, addressing market fears about overhang in GoTo’s stock.
Alibaba has signed a five-year strategic partnership with GoTo that will include the usage of Alibaba Cloud’s cloud services, with Alibaba commiting to hold its GoTo shares for the duration of the partnership.
There has long been concerns among analysts that pre-IPO investors in GoTo may be planning to exit their positions, which has had a negative effect on the company’s share price. It is believed that the commitment announced today may go some way toward assuaging such fears.
"We observed that GOTO shares had been under pressure due to concerns over major investors, including Alibaba, potentially exiting. However, with this five-year commitment, GOTO has secured a significant deal that should help ease this downward pressure on its shares," said an analyst from Panin Sekuritas, Sarkia Adelia.
According to analysts from Panin, Alibaba is GOTO's second-largest institutional investor after SoftBank. As of Aug. 31, Alibaba held 88.5 billion Series A GoTo shares, equivalent to 7.37 percent, through Taobao China Holding Limited.
Alibaba’s long-term commitment is expected to shift market focus away from overhang concerns, back to GoTo's improving fundamentals. The company announced strong second quarter (Q2) results in July as gross revenues grew by 39 percent year on year to Rp 4.3 trillion, while adjusted EBITDA losses were reduced by 95 percent year on year to Rp 48 billion.
GOTO shares have increased by as much as 25 percent over the past week, after declining significantly since the beginning of the year. On Sept. 17, GOTO shares closed at Rp 65 per share, rose 7 percent, and on Sept. 13, GOTO shares closed at Rp 61 per share.
In a research note on Sept. 18, BRI Danareksa Sekuritas analyst Niko Margaronis said Alibaba's decision would be able to align the interests between the key anchor shareholder and GOTO management.
“Alibaba, which holds a 7.4 percent stake, has committed not to sell its shares for at least the next five years. As a reminder Alibaba, along with SoftBank, last sold shares in February 2024 at a price range of Rp 80-90,” said Niko, in his report. “This move reduces uncertainty and signals confidence to other GOTO minority shareholders,” he added.
Previously, in a research note dated Aug. 27, Niko Margaronis and Sabela Nur Amalina from BRI Danareksa also set a target price of Rp 90 per share for GOTO, with a "buy" recommendation. This target considers GOTO’s potential revenue increase to Rp 15.34 trillion by the end of this year, compared to last year’s figure of Rp 14.78 trillion. The company’s gross transaction value (GTV) for Q3 and Q4 is also projected to show continued growth.
GOTO’s on-demand services segment, Gojek, has aggressively expanded its product offerings, which has contributed to GTV and EBITDA growth. This led to a 26 percent increase in users in Q2 2024.
Additionally, the fintech segment has shown a positive performance and impressive growth trends in the first half of 2024.
"We anticipate continued strong growth in GOTO Financial’s lending, including its 'buy now, pay later' [BNPL] service through Gojek, consumer and business loans via the Gopay app, and expanding financing options for TikTok users and drivers," according to the research note.
GoTo CEO Patrick Walujo emphasized that the collaboration with Alibaba not only strengthened GoTo’s technology infrastructure but also enhanced the company’s ability to deliver leading solutions and services to millions of users and businesses in Indonesia.
“This partnership marks a significant milestone in our journey to create a more inclusive and resilient digital economy in Indonesia. It also underlines our commitment to work with partners in a way that delivers the long term sustainable growth that returns value to our shareholders.” said Patrick in a press release on Sept. 17.
Selina Yuan, vice president of Alibaba Group and president of Alibaba Cloud Intelligence International, said the strategic partnership combined Alibaba Cloud’s world-class cloud computing and AI capabilities with GoTo’s vast ecosystem. “We want to empower businesses of all sizes in Indonesia and foster innovation to drive long-term growth."
