The article was originally published in Chinese, translated by the MW team into English.

Last week, GoTo, Indonesia’s largest internet company, announced the resignation of CEO Andre Soelistyo and his replacement by Patrick Walujo, the managing partner of private equity firm Northstar Group.

Andre Soelistyo joined GoTo in 2015 and became the co-CEO alongside Kevin Aluwi when founder Nadiem Makarim left the company to join Jokowi’s cabinet as Minister of Education in 2019. After Aluwi’s departure to become a commissioner last June (exactly a year ago), Soelistyo took on the role of sole CEO until now.

Following the news, GoTo’s stock rose by approximately 6%, returning to the level of the previous Monday.

Some thoughts:

GoTo is indeed facing some challenges:

  1. Ride-hailing business is relatively small in Indonesia; Grab, Gojek’s regional level, has a significant percentage of revenue and profit generated from Singapore and Malaysia, two affluent markets;
  2. Its food delivery business lags behind Grab in market share, and the entire food delivery market in Indonesia contracted in 2022;
  3. As for ecommerce, according to Momentum Works’ upcoming Ecommerce in Southeast Asia report, Tokopedia’s GMV is at the same level as Shopee in Indonesia, but its take rate is less than 1/3 of Shopee’s;
  4. The most profitable segment in digital financial services, consumer credit, has not gained much traction, while Shopee’s consumer lending business has already reached a loan book of over $2 billion (not including co-lending);
  5. Most importantly, GoTo has significantly less cash compared to its competitors. According to our estimates in Apples to Apples 2.0 report, Grab’s net cash liquidity at the end of March allows the company to survive for 18 quarters based on the Q1 2023 burn rate, whilst GoTo’s can last them for just 11 quarters.

In the past year, GoTo has tried to take measures to control costs and increase revenue, including:

  1. Two announced rounds of layoffs impacting more than 1,800 employees;
  2. Various initiatives to boost revenue, such as introducing platform fees for consumers, launching BNPL and optimizing platform commissions.
  3. Expressing confidence to investors, such as announcing in February this year, outside of the earnings season, that GoTo would achieve profitability at the EBITDA level earlier than expected, in Q4 this year.

However, investors seem to be not satisfied with GoTo’s steps;

  1. GoTo’s stock price has fallen by two-thirds since April 2022, despite the relatively friendly terms in the Indonesian Stock Exchange. A secondary listing in the United States seems unlikely in the near future;
  2. At the end of last year, the company attempted to convince investors not to sell their shares after the lock-up period – but it was unsuccessful, with share price dropping 7% daily (the max allowed in the exchange) for a few days in a row; 
  3. After Shopee and its affiliated financial services arm SeaMoney achieved profitability for two consecutive quarters, the pressure on GoTo became even greater, as investors are now seeing the results of Shopee’s aggressive cost-cutting measures from last year (despite all the negative press).

What should GoTo do next?

  1. Firstly, as we mentioned before, Gojek’s ride-hailing business should have merged with Grab instead of Tokopedia. It’s a pity that the two parties couldn’t reach an agreement on percentage ownerships of a merged entity; 
  2. We are unsure what can be done with the ride hailing business in Indonesia; meanwhile Gojek should exit Vietnam. The ride-hailing business in Singapore, however, could and should become profitable in the current environment; 
  3. Similarly, the overall growth potential of the food delivery business in Indonesia is limited in the short term. Therefore, a strong focus on cost-cutting measures and targeting relatively high-end market segments may be the most optimal solution;
  4. Both ecommerce and consumer finance businesses have the potential to be profitable, even at the current scale. However, the lack of relevant talent to execute these plans could be a fatal challenge;
  5. Walujo, as an early investor, should be familiar with GoTo and be able to make decisions that the previous management team was hesitant to make;
  6. However, we don’t think Walujo will stay in this position for the long term. After all, Northstar still has a $2.5 billion private equity fund to manage, and Walujo does not come from an operator background. It is in his best interest to serve as the long-term CEO of GoTo.

GoTo’s situation remains challenging, but at least now there is some hope for a breakthrough – hope they can seize it.

By the way, the four people in the photo below have all left management positions:

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].