In a groundbreaking move, ByteDance Ltd.’s TikTok has committed a substantial $1.5 billion investment into a joint venture with Indonesia’s GoTo Group, effectively gaining control. This investment marks a crucial step for the Chinese company to relaunch its shopping application in its primary online retail market.
TikTok secures 75% ownership in the merged Indonesian platform with GoTo, causing a 20% drop in GoTo’s Jakarta shares and concerns about its shift away from a profitable market. This deal marks a change in ByteDance’s strategy, allowing it to control the local market and comply with regulatory measures, while GoTo becomes a passive player in Tokopedia, diverting from its previous trajectory amidst competition with Sea Ltd. and TikTok.
“This benefits TikTok as it gains majority ownership and operational control of Tokopedia with minimal costs – only investments into the entity,” observed Jianggan Li, founder of Singapore-based consultancy Momentum Works.
The market reaction led GoTo shares to plummet in Jakarta as investors expressed concerns about the company’s reduced advantage in Indonesia’s rapidly expanding e-commerce market. However, this move also presents GoTo with an opportunity to limit exposure to the loss-making Tokopedia, allowing it to refocus on other sectors like digital financial services, particularly its primary business, the ride-hailing service Gojek.
Nirgunan Tiruchelvam, head of consumer and internet research at Aletheia Capital, stated, “The market now values GoTo’s e-commerce as an associated business only. Some investors also feel that the remaining primary business, Gojek, is now overvalued.”
Indonesia’s government enforced rules requiring platforms like TikTok to split payments from content. Now, with TikTok and GoTo’s approved deal, users can shop within TikTok again, under Tokopedia’s ownership. The shopping service will relaunch on Tuesday.
TikTok Shop, the rapidly growing segment of ByteDance, aims to expand beyond social media by targeting Indonesia’s online shopping market. Its success in Indonesia led to expansions in the US and plans for significant investments in Indonesia and Southeast Asia.
Tokopedia will buy TikTok Shop’s Indonesian operations for $340 million. Then, TikTok will take a majority stake in the merged company, with the deal set to finalize in the first quarter. GoTo won’t have to finance Tokopedia further, and its 25% stake won’t be diluted by more TikTok funding, as confirmed by the company and advised by Goldman Sachs Group Inc. Meanwhile, Elon Mask is taking on bots and has introduced his long-heralded plan to introduce fees for people posting comments on his X (formerly “Twitter”).
CEO Patrick Walujo, leading GoTo since June, aims to steer the company towards adjusted profitability by year-end, emphasizing the long-term earning potential of the ride-hailing and e-commerce enterprise. The management continues to follow the predecessors’ strategies, reducing losses by cutting jobs and promotions and tightening expenditure.
Bloomberg Intelligence notes that GoTo sacrifices e-commerce potential, but TikTok’s 125 million users could boost its logistics and financial services. Indonesia’s resistance to TikTok sets a precedent in Southeast Asia, with Malaysia also considering regulation. TikTok faces potential bans internationally due to security concerns in the US, Europe, and India.
