Tokopedia wants to list but which route will it choose?

One of Asia’s most prominent technology startups Indonesia’s Tokopedia is in the headlines once more as it is rumoured to have been approached by a business with links to none another than Peter Thiel and his partner Richard Li.

The special purpose acquisition company (SPAC) Bridgetown Holdings, which raised $550 million in an IPO in October is believed to have approached Tokopedia with a view to taking the business public. Should a deal between the two parties go-ahead Tokopedia would effectively reverse into the shell company created by Thiel and Li.

The rumoured approach by Bridgetown wouldn’t have come as a complete surprise to Tokopedia management as the business let slip that it was considering going public earlier this year.

Tokopedia is one of a clutch of Indonesian technology Unicorns- that is startups which have achieved a valuation of a billion dollars or more. The valuation for Tokopedia as a listed entity has been estimated at $10.0 billion dollars though that can change dramatically if interest in the business heats up.

Tokopedia appears to be keeping its cool and is said to have announced a new funding round including investors Google and Temasek, a Singaporean sovereign wealth fund. At the same time, Tokopedia is said to be talking to other South East Asian businesses.

Whilst Bloomberg recently reported that Tokopedia had engaged Morgan Stanley and Citigroup to advise it on its listing options and quoted Tokopedia as saying that: “We have not decided yet which market and method, and are still considering options,” and that “ (a) SPAC is a potential option that we could consider but we have not committed to anything at the moment.”

Ecommerce has been a hot ticker in 2020 and the South East Asian dimension could well add an extra frisson to any floatation of Tokopedia. More than 240 SPACs have been listed in the US during 2020 their popularity may have been fanned by the pandemic which made investor roadshows associated with traditional IPOs difficult if not impossible to host.

The immediacy of listing via a SPAC can also appeal to business owners and founders alike. However, the cost of doing so might put them off. Those costs are not borne in cash but are instead are met in stock or other securities. With SPAC sponsors receiving up to 20% of the equity in the merged entity when a deal is completed.

Which way Tokopedia decides to jump could act as a test case for other Asian tech businesses with designs on a stock market listing. Tokopedia is one of four Indonesian Unicorns that have been growing but are not yet profitable the others being Gojek, Bukalapak, and Traveloka. Not being profitable doesn’t preclude a traditional IPO but it would open the business up to scrutiny and questioning from potential institutional investors. Something that the SPAC route allows companies to largely avoid.

However, Tokopedia decides to list something looks certain and that is that its shares would be dual-listed and trade primarily in Jakarta with a secondary listing in the USA. Tokopedia’s president Patrick CAO said back in January that: “If you want to go for the international investor profile, plus technology expertise and depth in terms of capital, then US (is the best market). Considering our peer group Alibaba, Amazon, etc., are all listed (in) the US,”

How easy New York-listed Bridgetown Holdings would find it to accommodate that requirement remains to be seen and that kind of detail is likely to keep this story bubbling under, well into the New Year.