Sea Group commissioner: Why now is the time for local unicorns to IPO

The rumors of Indonesian companies planning to carry out an initial public offering are growing louder. Tokopedia, Gojek, Traveloka, and Bukalapak are prominent examples.

The drying up of private market capital could be a factor in this IPO rush. But Pandu Sjahrir, commissioner of Sea Group and the Indonesian Stock Exchange (IDX), shared a more nuanced perspective at an online conference, explaining why these companies should in fact aim for a public listing this year.

Photo credit: Pandu Sjahrir

While the IPO itself is a big hassle, companies could have it easier once they get over the hump. Sjahrir used Sea’s 2017 listing as an example to illustrate his point.

“The first US$1 billion was raised within 36 hours [after the IPO]. We then raised the next US$1 billion in 24 hours. In the private market, the effort [to raise that amount] would have drained our energy,” he said.

Sjahrir also believes that local retail and institutional investors will welcome internet companies to the IDX as they’ve been salivating at the prospect of putting money in tech.

In developed countries, institutional funds typically allocate 10% of their capital for tech. In Indonesia, however, such investors only set aside less than 1%.

Even non-unicorns can expect some success by listing on the IDX, Sjahrir added. Tourism marketplace startup Pigijo was able to raise US$850,000 via its IPO in January 2020, but its share price fell by a fraction from its offer price.

Meanwhile, payments startup Cashlez pocketed US$6.2 million when it went public in May 2020. But unlike Pigijo, Cashlez’s share price has gone up since its listing.

Sjahrir sees this as a sign that public investors will eagerly snap up shares in the likes of Gojek and Tokopedia. Institutional investors have already poured funding into these companies in private rounds.

However, it’s still unclear where the consensus on the valuation of these companies will land relative to the existing numbers. Also, the ability of these firms to raise multiple rounds (in the form of bonds) will hinge on their existing cash flow. Investors need to be convinced that they will get their money back.

Ultimately, companies with sound fundamentals will still win the fundraising game.

Tokopedia co-founder and CEO William Tanuwijaya / Photo credit: Tech in Asia

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