In the last two years, the Indonesia Stock Exchange (IDX) made history because it has emitent that organize e-commerce. In 2021, PT Bukalapak.com, Tbk. (BUKA) conducted an initial public offering (IPO) and managed to reap IDR 21.9 trillion Rupiah. Meanwhile, in 2022, two e-commerce companies who had successful IPOs, namely are PT GoTo Gojek Tokopedia Tbk (GOTO) and PT Global Digital Niaga Tbk (BELI). GOTO and BELI achieved IDR 13.7 trillion IDR 7.9 trillion, respectively, from IPO proceeds.
The IPO of companies in the e-commerce sector is a rational corporate action, referring to the condition of the capital market in the United States which is dominated by transactions and stock price performance engaged in the e-commerce sector. Calling it the domination by big e-commerce names such as; Amazon, eBay, Walmart, Homedepot, Apple and Tesla. However, the share performance of the three companies in the e-commerce sector in the Indonesian capital market was not as good as in the United States.
The technology sector has become an excellent investment sector for stock investors on the IDX during the pandemic. The consideration of investment decisions by investors is based on the promising business prospects of technology companies, resulting from the technological revolution that is accelerating due to restrictions on social and economic activities in various parts of the world. This investment trend is shown through the Technology Sector Index (IDXTECHNO) which recorded an increase during the year Y-o-Y of 316.84% and is categorized as a bagger stock (profit on investment above 100%).
Index growth per month during 2021 is presented in the following table:
The development of shares of companies listed in the technology sector on the IDX began in 2020. There were at least three out of fifty-one technology companies that went for IPO on the IDX during 2020.
This trend continued with the IPOs of large-scale technology companies the following year. In fact, it was recorded that the largest IPO in Indonesia was successfully achieved – by BUKA, a technology company engaged in the e-commerce sector. Year 2021 will be the peak of the development of technology stocks with the number of IPOs of seven out of fifty-four technology companies.
In 2022, GOTO and BELI became the technology companies in the e-commerce sector that sell shares on the IDX. GOTO is a startup in the e-commerce sector as a result of the merger of two business groups, Gojek and Tokopedia. Meanwhile, BELI is a startup in the PMSE sector under the umbrella of the Djarum group, which is owned by two of the richest businessmen in Indonesia. Year 2022 was closed with five out of fifty-nine technology companies that had IPOs on the IDX.
BELI showed a different direction of movement in stock prices, which still recorded a positive price movement. The IPO price of BELI was from 450 rupiah/share 470 rupiah/share, or an increase of 4.44%. This is probably supported by the community’s trust on Djarum group, which is the back-up of this company. In addition, BELI’s fresh funds are used wisely to pay debts so that the company’s burden becomes lighter.
The decline in the performance of technology companies’ stock prices was caused by various factors, both internally and externally. Technology companies that are classified as startup companies are often associated with business prospects that have difficulties in making profits in the future and is worsen with an increase in the company’s cost of capital.
One of these increased costs was the result of economic recovery, where there was an adjustment to Bank Indonesia’s policy on interest rates which had increased from an average of 3.5% throughout the year to 5.5% at the end of 2022. The increased cost of capital made Startup companies need to adopt policies to maintain business continuity, including employee layoffs and business transitions.
The following years are also expected to be tough for technology companies. The impact of recession that occurred on various countries and have experienced bankruptcy, such as Sri Lanka, Ghana, Pakistan, Bangladesh, and Egypt are becoming global concerns. This also has an impact on investors’ views where currently angel investors want returns on the investment made, contrary to the business processes of technology companies.
The business concept of technology companies tends to prioritize market penetration to reach a wider audience, so they tend to carry out a ‘cash burn’ strategy in realizing this goal. This has also been mentioned in the prospectus of the three leading e-commerce sector companies, where it is stated that based on the company’s net profitability performance, there is a possibility that the company will not be able to make a profit in the future. This condition causes angel investors to choose to tighten up, and even give up investing in technology companies.
Technology companies need to restore business image to investors to revive enthusiasm for investment in technology. Companies in the e-commerce sector have their own advantages in developing company value. BUKA has sufficient cash to repair and improve performance, GOTO has the most complete ecosystem and is the user’s top choice. Meanwhile, BELI has good management and support under the ownership of large conglomerate business groups in Indonesia. Taking advantage of the advantages possessed by each company and cost efficiencies made by technology companies and supported by reduced prices experienced by companies, as well as the potential for lowering interest rates in the following year will increase investment enthusiasm and investor confidence in related sectors.
Technology companies’ efforts related to excess optimization, cost efficiency and business transition require well-planned and well-executed corporate actions. The planning and execution of this corporate action is inseparable from the support of various stakeholders and supporting professionals in making proper and thorough preparations. This corporate action needs to be considered so that it makes sense for both parties, both in terms of the benefits and costs incurred in implementing it. Collaborators between regulators, companies and third parties need to be properly integrated in creating more conducive sectoral and national economic conditions.
In the end, rational investors will return to indicators of fundamental value compared to company value obtained from optimism in the form of income growth projections. Fundamental value indicators are formed from audited financial statements, relevant and faithful representation. Companies in the e-commerce sector must pursue profit in implementing their business strategy, rather than just pursuing revenue growth.
Meanwhile, management accountants and auditors involved in companies in the e-commerce sector must re-prioritize the principle of conservatism in accounting, which is the precautionary principle of accountants to avoid excessive optimism of company owners and management. The principle of delaying uncertain income and profits, but recognizing expenses and losses that are most likely to occur. High quality financial reports will make the company’s performance in the e-commerce sector more represented according to the actual and future conditions.