GoTo Group said MSCI’s decision to remove the company from its equity index by the end of August was a technical move linked to its share price and trading liquidity, rather than a reflection of its business performance.
GoTo’s shares have been stuck at 50 rupiah ($0.0028) apiece—the minimum trading price for mainboard stocks on the IDX—since May 13 amid fears that the Indonesian government’s 8% commission cap on ride-hailing firms will impact the company’s earnings.
“We understand MSCI’s decision regarding the exclusion of GoTo from its stock index, and we realise that this is disappointing news for many of our shareholders,” Audrey Petriny, head of corporate affairs at GoTo, said in a statement.
“The decision is purely technical, following GoTo’s share price being at the minimum level of 50 rupiah and accompanied by low trading volume, and was not caused by the company’s performance,” she added.
GoTo’s shares continued to trade at 50 rupiah on Thursday, with about 246.26 million lots, or 24.63 billion shares, queued on the offer side at that price. The queue represented roughly 1.23 trillion rupiah in nominal value across 22,288 orders.
GoTo said it would continue engaging with MSCI ahead of future index reviews.
“Index reviews are conducted periodically, and we will continue to maintain an active dialogue with MSCI,” Petriny said. “Meanwhile, we will remain focused on managing the business to create value for all shareholders.”
GoTo’s shares have been trading at their minimum floor despite the company’s improving profitability.
GoTo posted net profit of 252 billion rupiah ($14.1 million) in the second quarter, marking its second consecutive quarterly profit. Net revenue rose 31% year on year to 5.7 trillion rupiah, while group adjusted EBITDA jumped 137% to 1 trillion rupiah, crossing the milestone for the first time.
The company remains on track to meet its full-year adjusted EBITDA guidance of 3.2 trillion rupiah to 3.4 trillion rupiah, after raising its fintech EBITDA guidance while lowering its outlook for the on-demand services business following the 8% ride-hailing commission cap.
GoTo also plans to gradually execute its previously approved share buyback programme of up to 3.5 trillion rupiah, subject to market conditions and prevailing regulations. The company plans to seek shareholder approval to cancel 32.18 billion treasury shares, equivalent to about 2.7% of its outstanding shares.
FTSE, another index provider, removed GoTo from the FTSE Global Equity Index Series Mid Cap Index in the last week of June.
MSCI index review
MSCI’s decision follows its May review, when the index provider flagged potential index-replicability issues arising from GoTo’s very low liquidity after the stock began trading at its minimum floor price.
MSCI said at the time that it would review GoTo’s liquidity under its Global Investable Market Index methodology as part of the August review and delete the stock if it failed the relevant liquidity requirements.
In its August review, MSCI removed GoTo from the MSCI Indonesia Global Standard Index. The changes will take effect after the close of trading on Aug. 31. MSCI also moved CPIN from the MSCI Indonesia Global Standard Index to the Global Small Cap Index. The index provider did not add any Indonesian stock to the Global Standard Index.
Mirae Asset Sekuritas Indonesia said GoTo’s removal was linked to its low liquidity, creating potential issues for passive investors seeking to replicate the index.
“MSCI specifically mentions low liquidity due to GoTo remaining at the minimum price of 50 rupiah since May as the cause of potential index replicability issues,” Rully Arya Wisnubroto, head of research and chief economist at Mirae Asset Sekuritas Indonesia, said in a statement.
Wisnubroto said the main impact would be technical, with passive outflows expected ahead of the index changes taking effect at the end of August. The absence of any Indonesian addition to the Global Standard Index also means there will be no corresponding inflow to offset the potential outflows, he said.
Wilbert Arifin, a research analyst at Mirae, estimated passive outflows of about 500 billion rupiah to 1 trillion rupiah on the effective rebalancing date after Aug. 31.
He expects the impact on the broader market to remain limited, with Indonesia’s weighting in the MSCI Emerging Markets index declining only from about 0.49% to 0.46%. The selling pressure is expected to be concentrated in stocks directly affected by the index changes.
GoTo has lost more than 85% of its market value share since listing in April 2022.
