The Short-lived Merger of Indonesia's Tech Giants: Gojek and Tokopedia

The much-anticipated merger between Indonesia's two tech giants, Gojek and Tokopedia, which began in May 2021 and went public as GoTo Gojek Tokopedia (GOTO) in April 2022, has come to an unexpected end. The partnership, once hailed as a long-lasting union, has culminated in a separation, with GOTO relinquishing control of Tokopedia to the new social media behemoth, TikTok, a subsidiary of Chinese startup ByteDance, the world's most valuable startup.

In an incidental public presentation scheduled for Wednesday (28/2), it was revealed that Tokopedia's market valuation before TikTok's investment stood at Rp 9.41 trillion, or approximately US$606 million. This indicates that post-merger and pre-TikTok investment, Tokopedia no longer retained its unicorn status—a valuation exceeding US$1 billion.

This valuation is significantly lower than Tokopedia's peak valuation before the merger with Gojek. In its last funding round as an independent entity, Tokopedia secured Series H funding from Temasek and Google worth US$350 million, valuing the company at US$7.5 billion.

In essence, Tokopedia's valuation has plummeted by 92% from its peak.

TikTok injected capital through the acquisition of 38,198,745 new shares at a price of Rp 747,874 per share, representing a 1.14% premium over Tokopedia's fair valuation. The total funds disbursed by TikTok for the acquisition of new shares amounted to Rp 13.04 trillion (US$840 million). Tokopedia will also receive a promissory note worth US$1 billion.

Ultimately, TikTok will control 75.01% of Tokopedia's shares, with GOTO holding the remaining 24.99%, undiluted even if Tokopedia raises funds in the future.

GOTO stated that Tokopedia's significant devaluation reflects a broader trend experienced by other global players. In the presentation, GOTO cited Shopee's parent company, Sea Ltd, whose EV/NTM Revenue ratio plummeted from 9.5 in early January 2021 to 1.1 by the end of January this year. Additionally, Alibaba's EV/NTM Revenue ratio dropped from 4.8 to 0.9 during the same period, and Etsy decreased from 12.1 to 3.4.

This indicates that investors are no longer generous in their valuations of startups, particularly those that are mature and focused on profitability.

While GOTO did not disclose the EV/NTM Revenue in the incidental presentation, it cited Tokopedia's third-quarter revenue of Rp 8.96 trillion. With a valuation of Rp 9.41 trillion (US$606 million), Tokopedia's EV/NTM Revenue ratio stood at only 1.05 times.

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