Vantage Point: Why the sale of Tokopedia to TikTok is good economics for GoTo

Vantage Point: Why the sale of Tokopedia to TikTok is good economics for GoTo

This weekly newsletter chronicles top digital themes and trends playing out in SE Asia, especially Indonesia. We will decode policy and regulatory changes affecting digital economy sectors, crunch earnings data of top players, track developments related to gig economy workers and attempt to piece together ecosystem buildouts in some of the fastest-growing, venture-backed plays. You can access the previous editions of the Vantage Point weekly posts here.

TikTok renews its e-commerce ambitions in Indonesia

After a protracted period of speculation, Indonesian tech giant GoTo has confirmed that it will sell a 75.01% stake in its e-commerce division Tokopedia to TikTok — the ByteDance-owned short video app whose social commerce business, TikTok Shop, was shuttered in September following the country’s ban on social commerce.

TikTok has committed to invest over $1.5 billion into the enlarged Tokopedia, with $500 million paid immediately, signifying its intent to not let go of the significant Indonesian market.

GoTo underscored that the merger would drive growth for Indonesian medium, small, and micro enterprises (MSMEs), which should appease the government.

Tokopedia and TikTok Shop Indonesia’s businesses will be combined under the existing PT Tokopedia entity in which TikTok will take a 75.01% stake. GoTo will maintain a non-dilutive 24.99% stake— i.e. there will be no additional dilution of GoTo’s shares for perpetuity under the current arrangement.

The extent of the sell-down suggests Tokopedia will be deconsolidated from GoTo once the transaction is complete, possibly in Q1 2024. The shopping features within the TikTok app in Indonesia will be operated and maintained by the merged entity.

GoTo’s on-demand and fintech businesses will benefit

Besides paving the way for the return of TikTok Shop in Indonesia, the merger has benefits for GoTo as well.

Edited by: Pramod Mathew

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