Jakarta, September 17 – Indonesian internet company GoTo has agreed to utilize cloud services from Alibaba Group Holding Limited, with the Chinese tech giant committing to not sell any additional shares it holds in GoTo during the agreement period. This strategic move could potentially bolster GoTo’s flagging stock price, which has plummeted approximately 80% since its initial public offering (IPO) in 2022.
Background and Context
GoTo, formed through the merger of ride-hailing and grocery delivery firm PT Gojek Indonesia and e-commerce platform Tokopedia, has been facing challenges in the highly competitive Southeast Asian market. The company, which is yet to turn a profit, has been engaged in a fierce battle with Singapore-based Grab Holdings Ltd. The decline in user growth has forced GoTo to implement cost-cutting measures, including layoffs and exiting markets in Vietnam and Thailand.
The Agreement
According to a report by Bloomberg, the agreement between GoTo and Alibaba was formalized through a memorandum of understanding (MoU). As part of the five-year deal, GoTo will leverage Alibaba’s computer infrastructure to enhance the operation of its services, which include ride-hailing and delivery services in Indonesia and Singapore. However, the exact value of the transaction was not disclosed, and the agreement is non-binding.
Impact on GoTo’s Stock Price
The news of Alibaba’s commitment to not sell further shares comes as a relief for GoTo, whose stock price has been under significant pressure. Since its IPO in 2022, the company’s shares have seen a dramatic decline, largely due to Alibaba and other major shareholders reducing their stakes. Alibaba, an early investor in GoTo, has sold off billions of shares, reducing its ownership from approximately 9% in 2022 to about 7.5% currently.
The agreement could provide a much-needed boost to GoTo’s stock price, as the commitment from Alibaba signals confidence in the company’s long-term prospects. This is particularly important given the current market conditions and the company’s need to stabilize its operations and finances.
Alibaba’s Strategy
Alibaba’s decision to support GoTo through this agreement aligns with its broader strategy of expanding its presence in Southeast Asia, a region with significant growth potential. By providing cloud services to GoTo, Alibaba can strengthen its position in the region’s tech ecosystem and potentially benefit from GoTo’s growth in the ride-hailing and delivery sectors.
Challenges and Competition
Despite the positive implications of the agreement, GoTo continues to face stiff competition in the Southeast Asian market. Grab Holdings Ltd., its main rival, has been aggressive in expanding its services and securing market share. GoTo’s exit from Vietnam and Thailand and the sale of its loss-making e-commerce division, Tokopedia, to TikTok for $1.5 billion last year, highlight the challenges the company faces.
Conclusion
The agreement between GoTo and Alibaba marks a significant step in GoTo’s ongoing efforts to stabilize its operations and regain investor confidence. With Alibaba’s commitment not to sell further shares and the use of its cloud services, GoTo may be able to strengthen its competitive position in the region. However, the company will need to continue to navigate the challenges of a highly competitive market and demonstrate sustainable growth to achieve long-term success.
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