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.

It is only understandable that BUKA’s stocks suddenly captured the attention of retail investors. At that time, it was incredibly difficult for investors to get a confirmed allocation of shares in the company.

However, none of the analysts' target price predictions have been proven right to date. A peculiar thing happened on the third or fourth day following the IPO. Just before BUKA's shares plummeted, there was a considerable net sales activity by foreign investors. As if on cue, these investors collectively “dumped” BUKA’s shares. Does this mean they appraised BUKA’s IPO shares as too expensive? No doubt this is a compelling topic worth discussing on another occasion.

The various research reports released by market analysts are also fascinating to observe. Amid the declining share price, it turns out that the target price set by BUKA remains high. Mandiri Sekuritas in its Dec. 1, 2021, report predicted a share price of Rp 1,400 per share, JP Morgan set a price of Rp 1,000 per share on Dec. 1 and CGS CIMB announced a target price of Rp 1,500 per share on Sept. 22, 2021.

After looking at all these numbers, one could not help but wonder: Will the predictions ever come true? BUKA's market capitalization has plunged from Rp 85 trillion to around Rp 45 trillion. How long will BUKA's share price continue to decline? Nobody knows.

Say we forget the views of analysts for a moment. After all, we don’t have to listen to what they are saying all the time, for analysts are often highly opinionated as well. A person’s opinion can easily influence others and create a situation of “the blind following the blind”.

Let's also set aside BUKA’s fluctuating share price and instead focus on Bukalapak as a company. I believe the founding shareholders and the management of BUKA have grasped this challenging situation and understood the concept of value creation.

Likewise, the world-class investors who own BUKA will not be silent. They have definitely prepared their own calculations and strategies. It is only a matter of time before corporate action is taken to reverse this misfortune and improve the company’s share price.

On the other hand, there is no doubt that many retail investors and others who bought into BUKA before the IPO — subject to a lockout condition for several months — were left dumbfounded and disappointed after witnessing the near-50 percent fall of its share price in such a short period of time.

The management and shareholders of Bukalapak are still faced with quite a daunting task despite improvements in BUKA’s financial performance during the third quarter of 2021. The company’s net loss now sits at Rp 1.1 trillion, lower than Rp 1.4 trillion in the same period last year. Furthermore, revenue has also grown 42 percent year-on-year to Rp 1.3 trillion as of the end of September 2021.

This is an encouraging sign. As a reminder, the share price is fundamentally the present value of future earnings. This means value creation is largely determined by the fundamental performance of a company. Therefore, the top priority is to seek out ways to increase BUKA’s revenue generation.

Do not forget that BUKA still has Rp 23 trillion tucked in its “war chest” — a far cry from its initial capital of Rp 1.5 trillion before the IPO. It still has so many opportunities to turn this situation around. In the future, we can expect more company acquisitions as a means to support BUKA’s business growth, as well as to boost its revenue and profit. This way, the currently low BUKA stocks can be perceived as undervalued, encouraging investors to buy more shares and in turn, recover the company’s share price once more.

Hopefully!

 ***

The writer is chairman and founder of TEZ Capital Group.

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