Understanding Indonesia’s first startup IPO

Photo credit: sutiporn / 123RF Stock Photo.

Kioson yesterday became the first local tech firm to list on the Indonesian Stock Exchange (IDX).

It’s unusual for an early stage company that still posts losses to go this route. Despite concerns, Kioson achieved its modest target.

The startup raised US$3.3 million from selling 150 million shares. That’s just slightly more than the median deal size for a series A venture capital round in Southeast Asia.

At a press conference yesterday, the startup said that the offering was more than ten times oversubscribed, meaning there was more investor demand than could be met. It also pointed out that the share price jumped from US$0.02 to US$0.04 on the first day.

It’s a positive result, but Wellson Lo, founder of Stockbit, an online community for Indonesian investors, calls for caution.

“The fact that the share price is up 50 percent in the first day of trading sometimes grabs headlines in the media, but we have to pay a particular attention on the ‘liquidity’ of the share itself,” says Lo.

He points out that, in the first day, only 23,400 shares were traded, which amounts to less than US$1,000. “This can mean a lot of things, but investors should be careful since price movement is less important in the absence of healthy trading volume,” adds Lo. On its second day of trading, the volume has dropped to 3,400.

Kioson runs a network of small shops that sell digital goods like phone air time, gaming, and ecommerce vouchers through its app. It was founded just over two years ago and now has 19,000 kiosks across Indonesia.

According to its latest financial statement, its total revenue in 2016 was roughly US$1.9 million with a US$840,000 loss.

Support from the top

“The company has potential even though it’s young,” says Kerry Rusli of Sinarmas Securities, the investment bank that underwrote Kioson’s IPO.

Sinarmas Securities is a local investment bank associated with the Sinarmas conglomerate.

It may have been more inclined to take the risk of underwriting the IPO because Kioson isn’t a startup of the Silicon Valley type, where a team of entrepreneurs creates an innovative product from scratch and raises venture capital to grow the business. It’s co-owned by several established companies. Artav Mobile Indonesia, a mobile phone SIM card and airtime distributor, holds the majority.

Kioson’s IPO was also supported by the Indonesian Stock Exchange itself – it has been trying to attract tech companies to list by launching an incubator earlier this year.