GoTo’s Post-IPO Ascent Is Far From a Done Deal

GoTo’s initial backers can expect very healthy returns on investment, indeed — but one wonders what’s next.

As noted in this space last week, GoTo Group has gotten the go-ahead to list its shares publicly in an initial public offering (IPO) that would be worth as much as $1.1 billion.

Read also: GoTo Wins Approval for $1.1B IPO

That IPO, Bloomberg reported on Wednesday, would mean that the value of stakes held by Alibaba and SoftBank would be worth as much as $5 billion.

But beyond the headlines, and beyond the fact that a new FinTech is coming to market, the risk is there (though it always is) that the enthusiasm will wane, as has been the case for so many FinTech brethren that have IPOed.

As has been shown by PYMNTS, the IPO FinTech Tracker was down 20% to end the first quarter.

And of the more than 40 names tracked through the Index, the average listing is down more than 20% from its IPO price.

Busted or Not? 

Now, this is not to say that GoTo will necessarily join the ranks of busted IPOs.  But it is undeniable that we are in a different environment now, where investors are swift to shoot first and ask questions later.

Grab might be the most visible example, at least in the drive to forge the super app, especially in southeast Asia.  That firm went public at the end of last year, opening at a bit more than $13.  The stock closed Wednesday at $3.59.

We’ll know more about Grab’s fortunes in the coming weeks, when the company reports its earnings for the quarter that just ended in March.  But as evidenced in the most recent report, for the three months that ended in December, while the company’s gross merchandise value (GMV) was up 26% to $4.5 billion, revenues sank 44% to $122 million.  The company has also been spending money to attract drivers through higher spending on commissions.

We might say, then, that the super app crown might be worn by the firm that can sustain momentum even as it strives to cobble together ride-hailing and food delivery and finance offerings, too.

In at least one respect, Grab mirrors some of the ecosystems being forged by other companies such as Alipay and WeChat Pay – i.e., not with the messaging or the gaming, but with the eCommerce in play. Tokopedia is a differentiating factor here.

In details announced by the company last month, GoTo estimated that its ecosystem contributed 2% of  Indonesia’s GDP and its offered services address two-thirds of the country’s household consumption.

Pro forma Gross Transaction Value of $28.8 billion in the 12 months ended Sept. 30 has translated to revenues of about $1 billion over the same period. The company estimates that its on-demand services total addressable market (TAM) is expected to grow from about $5.4 billion in 2020 to about $18 billion in 2025.

It’s no given that post-IPO, GoTo’s shares will see smooth sailing, with uninterrupted hockey stick growth up and to the right.  But the jockeying with Grab, (and with Sea and with others) will be key factors to watch.