GoTo Preps First-Ever Buyback After Selling E-Commerce to TikTok
(Bloomberg) -- GoTo Group plans to buy back as much as $200 million of stock after recording its first-ever profit on an adjusted basis, hoping to stoke investor confidence even as its growth slows.
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The Jakarta-based company, which competes with Singapore’s Grab Holdings Ltd. in ride-hailing and food delivery, reported 77 billion rupiah ($5 million) in adjusted earnings before interest, taxes, depreciation and amortization for the fourth quarter. This compares with an adjusted loss of 3.1 trillion rupiah a year earlier.
The stock buyback is the first ever for GoTo, which is trying to reassure investors of its future earnings prospects even as competition from Grab and a slew of smaller regional rivals intensifies. To improve its profitability, GoTo in December agreed to relinquish control of its e-commerce arm Tokopedia to ByteDance Ltd.’s TikTok, after the social media company said it would invest $1.5 billion in a joint venture that it’ll be in charge of.
The deal resulted in a massive goodwill writedown of about 79 trillion rupiah, bringing GoTo’s net loss for the fourth quarter to about 81 trillion rupiah. For this year, GoTo forecast breakeven on adjusted Ebitda basis.
GoTo had disclosed the adjusted profit milestone in January, without specifying the amount. The feat highlights GoTo’s efforts to reverse years of losses through drastic measures, including thousands of job cuts and large reduction in marketing spending. Following years of rapid growth, the company has turned its focus on the bottom line after its shares lost more than 70% since its initial public offering in Jakarta in 2022.
The ride-hailing and delivery division, going forward GoTo’s largest unit by far now that Tokopedia has been split off, posted adjusted fourth-quarter Ebitda of 239 billion rupiah after a loss of 699 billion rupiah a year earlier.
Still, the company’s growth has slowed dramatically from the triple-digit pace of past years, underscoring the impact of economic uncertainty and competition. Fourth-quarter net revenue, which strips out incentives to driver and merchant partners and promotions to users, rose 26% to 4.3 trillion rupiah.
What Bloomberg Intelligence Says
GoTo’s future hinges on an e-commerce takeover by ByteDance’s TikTok, which should relieve pressure on its bottom-line significantly, but at the cost of its e-commerce potential. The sale means GoTo can redirect resources to more margin-accretive businesses such as its on-demand services, the segment that’s closest to breaking even. The sale of its e-commerce arm, albeit potentially giving up the bulk of its opportunities in Southeast Asia’s most lucrative digital service, might pay off in the long term if TikTok’s live-shopping success extends beyond its home market Indonesia.
-Nathan Naidu, analyst
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The cost reductions and new partnerships are easing pressure on GoTo’s finances, but the challenging market has forced the firm and its rivals to consider aggressive options. Grab and GoTo this year revived discussions about a merger of their core businesses, Bloomberg News reported, an alliance that could help stem spending to chase consumers across the region.
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