New IDX ruling on multiple voting rights, more young investors spell good news for Indonesian tech IPO aspirants

Jakarta

WITH several startups looking to list on the Indonesian Stock Exchange (IDX) in the coming months, the announcement by the country's Financial Services Authority to allow multiple share holding rights for certain shareholders could not have been more timely.

The ruling - along with other expected changes including tax incentives and allowing unprofitable firms to list - is squarely aimed at tech companies such as GoTo, OVO, Traveloka and BliBli, all of which are eyeing a listing in the near future.

Sources told The Business Times that the changes are being driven by IDX commissioner Pandu Sjahrir, who was appointed with the specific task of attracting the country's fast-growing unicorns and decacorns to list on the IDX and not elsewhere.

"When we look at other markets such as the US and Hong Kong where they have accommodated tech companies, I see this as a positive move to grow tech-based companies in Indonesia and where the public can participate in their growth," said Sjahrir in a recent interview.

E-commerce platform Bukalapak became the first tech start-up to list on the IDX earlier this year, raising US$1.5 billion.

GoTo Group, formed after a merger between ride-hailing app Gojek and e-commerce giant Tokopedia, is expected to list in the first quarter of 2022 with an estimated valuation of US$25-30 billion.

GoTo has hired banks to help it raise around US$1 billion from its initial public offering (IPO), said a Bloomberg report on Friday (Dec 17). The company has picked Mandiri Sekuritas and Indo Premier Sekuritas as underwriters.

Market players noted that GoTo had been waiting for the multiple voting rights ruling to be introduced as criteria to list on the IDX.

Under the new rules, which came into effect on Dec 1, companies seeking shares with multiple voting rights must meet criteria such as having been operating for at least 3 years and recording at least 30 per cent annual revenue growth for over 3 years.

The multiple share structure can be implemented for 10 years and extended another decade if shareholders agree.

"The proposed changes to the listing requirements will allow the IDX to attract tech players, many of whom may otherwise go to markets that allow multiple voting rights," said Joel Shen, partner at Withersworldwide.

"Many of these tech companies are driven by the strategic vision of their founders. As such, the founders have a disproportionately large influence on the direction of the company."

Multiple voting rights give certain shareholders such as founders a greater say in strategic decisions and prevents the need to obtain shareholder approval for major decisions.

For instance, it is understood that Grab's founders - while holding only 3 per cent of the company's listed shares - control 60 per cent of its voting rights.

The company recently listed on Nasdaq by merging with a special purpose acquisition vehicle.

Market observers however noted that while the new multiple voting rights ruling will boost tech startups eyeing IPOs, they will face certain challenges when listing on the IDX.

Foremost among these challenges is the Indonesian market's relatively low capital base.

"Size does matter; and hopefully the GoTo IPO will be a huge success," said Harry Su, managing director of Jakarta-based financial advisory firm Samuel Sekuritas.

"Tech-related IPOs are still new; and judging by the performance of Bukalapak, investors remain wary of buying shares of companies that are not profitable."

One potential upside for tech IPOs is the large number of new young investors who are now active.

The number of registered trading accounts has shot up from 300,000 a decade ago to 6 million currently.

These young investors are not only driving the growth of the country's stock market, they are also more comfortable in investing in tech companies given that they are frequent users of their services.