Eager investors ready to bite as Bukalapak makes market debut

Jakarta

JOHNNY Koo and Nicholas Jayabuana are among thousands of Indonesians eager for a slice of Bukalapak's landmark initial public offering (IPO) when the e-commerce player finally makes its long-awaited market debut on the Indonesia Stock Exchange (IDX) on Friday.

Mr Koo, an entrepreneur, put in a first bid for 400 million rupiah (S$37,643) but was not allotted any shares. He later made another bid for 240 million rupiah.

If he is successful, he says he won't hold on to the shares for very long as he plans to cash in early.

On his part, Mr Jayabuana feels that Bukalapak, as with other Indonesian unicorns, is undervalued and worth a decent punt.

"I am also planning to bid for GoTo shares when the company is listed and I hope that they list on the IDX," he said, referring to the tech giant formed in May this year after a merger between Gojek and Tokopedia.

The surge in retail investor interest in Bukalapak - the first Indonesian tech player to seek a public listing - has compelled the company to significantly increase its retail portion from 2.5 per cent to 5 per cent of its total shares offered.

"All eyes are on Bukapalak's debut," said Harry Su, managing director and head of Equity Capital Markets at Samuel International.

"Definitely, this will be an important and a historic IPO for Indonesia because its success will pave the way for other tech companies to access the capital markets."

Indonesia is enjoying a bumper year in deals in South-east Asia, with 23 companies listing on IDX in the first half of 2021. Bukalapak's listing is the largest in the last decade.

Market analysts said that the Bukalapak IPO has been oversubscribed by more than four times. The company is issuing 25.76 billion shares, which makes up 25 per cent of its total shares.

The company says the proceeds will be used for working capital for itself and its subsidiaries.

The funds, noted analysts, will allow Bukalapak to compete head-on with other e-commerce giants such as GoTo and Shopee.

"Without the IPO, Bukalapak would have been in negative equity by the end of the year," said one analyst who did not wish to be named. "So the listing's success is crucial for the company's long-term future."

Bukalapak is offering 25 per cent of its total share capital to investors, which would raise 21.9 trillion rupiah, outstripping the previous record set by coal miner Adaro Energy which garnered 12.25 trillion rupiah for its IPO back in 2008.

Bukalapak will list with an IPO price of 850 rupiah per share. With the increased allotment for retail investors, the public will be able to buy up to 1.09 trillion rupiah worth of shares, as compared to 547.5 billion rupiah previously.

"The public interest in Bukalapak shares is very high," said Anderson Sumarli, the chief executive officer of Ajaib Sekuritas Asia, a retail investment platform.

"The high demand reflects the growing interest among the population, especially the younger group, towards investing in the capital markets."

With nearly 70 per cent of the population deemed to be within the productive age and with a fast-growing middle class, Indonesia is an emerging market for retail investment products.

The country's love affair with tech and unicorns is creating plenty of hype for tech IPOs.

The increased public allotment, however, could be a double-edged sword for Bukalapak as retail investors traditionally do not hold on to shares for long periods.

Achmad Yaki, an analyst at BCA Sekuritas, expects retail investors to sell within the first five days of Friday's listing.

"The current hype around Bukalapak shares is temporary as it is not attracting long-term investors," he said. "This is because the unicorn is still loss-making and will only turn profitable potentially in the next four to five years."

Mr Su from Samuel International concurred, noting that the fact that the company is willing to expand the retail portion suggests that it is willing to take the risk of its share price falling after the opening day.