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Tech companies and the market sentiment
BUKA’s IPO was considered a huge success as it raised Rp 21.9 trillion — the highest figure seen in decades.
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Stocks to watch: Wearing a mask, an employee walks past screens showing fluctuations in stock prices at the Indonesia Stock Exchange (IDX) in Jakarta on Aug. 3, 2021. (Antara/Galih Pradipta)
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s 2021 drew to a close, the shares of Bukalapak (BUKA) were in freefall. They have slipped from their initial public offering (IPO) price of Rp 850 (6 US cents) per share on Aug. 6, 2021, to around Rp 450 per share to date. If you invested Rp 1 million in the company four months ago, its share value is currently worth only Rp 500,000.
What Bukalapak experienced is nothing particularly new. Amazon also went through a similar ordeal a few decades back. Since its May 1997 IPO, the tech conglomerate’s share price has always been below its IPO price of US$18. To improve its situation, Amazon split its stock several times, turning one share into 12 shares by the end of 1999. When the “dot-com bubble” burst in the early 2000s, the prices of tech stocks, including Amazon’s, fell off significantly and became worthless.
In response, Amazon pivoted and expanded its business, growing exponentially over the years. During its IPO, the company’s capitalization value was $359.5 billion. Now, it stands at $1.74 trillion, or three times the capitalization value of all Indonesian public companies, which amounts to $570 billion.
One can also look at Alibaba (BABA) as an example. BABA’s IPO in September 2014 was the largest in history. The company successfully raised $25 billion in fresh funds. Its share price at the time of the IPO was $94, which rose to $114.56 in the first two months, then remained below the IPO price until September 2016. Entering its third year, Alibaba’s share price rose to as high as $309.3 in October 2020, then suffered a dramatic decline and now sits at a value closer to its IPO level.
The rise and fall of IPO stock prices is a common occurrence. In my previous article “Keeping Track of Indonesia’s Retail Investor Boom” (The Jakarta Post, June 28, 2021), I described sentiment price as the price of a stock that is influenced by investor sentiment and not at all related to the company's fundamental performance.
BUKA’s IPO was a huge success as it raised Rp 21.9 trillion — the highest figure seen in decades. BUKA's shares soared to the level of Rp 1,060 per share, almost exceeding the 25 percent auto-reject limit. Not only is this exciting, what BUKA has achieved has also opened a wide door of opportunity for other tech companies that are looking to go public in Indonesia.
BUKA’s success story was forecasted by many analysts ahead of its IPO. A research report published on Aug. 6, 2021, revealed the estimated target price for BUKA to be Rp 1,620 per share, while a report issued on the same day by CGS-CIMB predicted Rp 1,500 per share.
