It was reported last week that Southeast Asian ride-hailing and supply big Seize is trying to safe a $2 billion mortgage with a view to purchase Indonesia’s GoTo. The deal, if it goes via, would worth GoTo at round $7 billion and symbolize a significant rewiring of the area’s consumer-facing tech sector. Based on Bloomberg, Seize is reviewing GoTo’s accounts, which means that talks are moderately superior. GoTo has denied such talks are occurring and stated it doesn’t have a deal with anybody. It’s all very cloak and daggery. So what’s going on?
First, a little bit of background. Seize operates all through Southeast Asia however is listed on the Nasdaq in america. It primarily does ride-hailing and deliveries, however has just lately branched out into monetary companies and is backing one of many first massive digital banks in Southeast Asia. The inventory worth cratered on the finish of 2021, however has regained a little bit little bit of worth in current months.
An necessary a part of this story is that Seize has by no means been worthwhile. In 2024, Seize recorded a internet loss for the yr of $158 million. This may increasingly appear dangerous to the untrained eye, but it surely’s really proof of progress as Seize misplaced $485 million in 2023 and $1.7 billion in 2022. This implies the losses are narrowing. There’s one other necessary factor we must always think about, which is that Seize’s internet cashflow from operations in 2024 was $852 million.
GoTo is the mother or father firm of Gojek, the ride-hailing tremendous app that took Indonesia by storm beginning round 2015. Gojek is an indispensable a part of life for many individuals who reside in cities in Indonesia and has been touted as one thing of a nationwide success story. Gojek merged with Indonesian e-commerce platform Tokopedia in 2021 (that’s the place the moniker GoTo got here from) after which went public on the native inventory trade in a blockbuster IPO that raised over $1 billion and gave the corporate an almost $30 billion market valuation.
Like Seize, GoTo has by no means been worthwhile. However, additionally like Seize, the losses are narrowing. In 2024, GoTo posted a internet lack of around $331 million (at present trade charges). This appears dangerous. However to place it in perspective, that is the primary yr since 2020 that GoTo misplaced lower than a billion {dollars}. In 2023, it took a write-down of over $5 billion, principally as a result of Tokopedia was not value as a lot as folks thought when the 2 firms merged. I clarify how that went down right here.
If we take a look at money from working actions, GoTo was at damaging $38 million in 2024. Not nice however a giant enchancment from greater than $1 billion in damaging working cashflow in 2023. That is largely from massive spending cuts. Working bills decreased 28 % from 2023 to 2024, which adopted even greater belt tightening of 40 % from 2022 to 2023.
It’s fairly clear what is going on right here. Tokopedia was dragging down GoTo’s backside line, so that they spun it off and at the moment are slashing bills in an try to eke out some revenue. The query is why one ride-hailing and supply app (Seize) needs to tackle $2 billion in new debt to purchase a regional competitor (GoTo) at a valuation of $7 billion when neither firm has ever turned a revenue?
Of the 2, Seize is arguably in a stronger place. Not solely is Seize producing a whole lot of thousands and thousands in internet money from operations, however there’s a good likelihood they may attain profitability this yr. Income at Seize elevated 19 % in 2024, in comparison with simply 6 % at GoTo. Seize can be extra diversified. Their major markets are Singapore, Malaysia and Indonesia, however in addition they function within the Philippines, Thailand and Vietnam. These final three markets accounted for $745 million in income in 2024.
In the meantime, Seize’s growth in Indonesia is slowing. Income from Indonesian operations grew by solely 6 % in 2024. Common income progress in different markets was 24 %. With profitability now in sight and slowing progress within the area’s largest e-commerce market, it appears the simple play is for Seize to easily purchase its major rival. However will regulators even approve such a deal?
I’ve my doubts. Not solely would a merger of GoTo and Seize severely cut back competitors for ride-hailing and meals supply companies within the area, however GoTo is considered by many in Indonesia as an necessary nationwide undertaking. Even when it by no means turns a revenue, GoTo serves a really helpful perform within the Indonesian economic system by boosting consumption and permitting small companies to extend gross sales. At the same time as tales of secret discussions proceed to leak, sooner or later, the logic of such a merger will run up towards the truth that the Indonesian authorities most likely doesn’t wish to see GoTo owned by a overseas firm.
