(Aug 12): GoTo Group, the Indonesian ride-hailing and food delivery platform once valued at more than US$32 billion (RM131 billion), faces the prospect of being dropped from MSCI Inc’s indices on Wednesday after a plunge in its share price left the stock difficult to trade.

Stock in the Jakarta-listed company has been stuck at 50 rupiah — or less than one US cent — for about three months, their minimum based on stock exchange rules. MSCI is set to take into account rising complaints from asset managers about their inability to trade GoTo shares due to the price floor, according to people familiar with the matter.

MSCI is widely expected to decide on GoTo’s status when it announces a review of its various indices on Wednesday evening in New York.

GoTo’s potential index exclusion may weigh on Indonesia’s broader stock market, which has tumbled about 27% this year in a sell-off sparked by MSCI’s warning in January of a potential market-status downgrade. Even with an MSCI removal, passive funds invested in GoTo, which made up about 4% of the MSCI Indonesia Index at the end of July, may find it difficult to exit their positions as sellers are likely to far outweigh buyers.

“GoTo has been an unfortunate story of a national champion that fell from grace,” said Angus Mackintosh, an analyst at Aletheia Capital. “The cut from MSCI at this stage will make little difference given it has already been effectively suspended. It cannot go any lower.”

Ejection from MSCI’s indices would be the latest blow for GoTo after years of heavy losses due to competition against deep-pocketed rivals such as Grab Holdings Ltd. A series of restructurings and leadership changes have helped the company post its second straight quarterly profit, even as pressure on earnings intensifies amid rising oil prices driven by the Middle East war. 

GoTo, backed by Alibaba Group Holding Ltd, was once one of Indonesia’s most valuable companies, with its market capitalisation topping US$32 billion shortly after its Indonesian listing in April 2022. Optimism about the company’s growth prospects didn’t last very long though as concerns about its path to profitability and financial discipline damped investor enthusiasm.

Years-long talks about a potential takeover by Singapore-based Grab have shown little sign of progress towards a firm deal.

As part of its May review, MSCI froze changes for GoTo in its indices, citing potential index replicability issues due to its low liquidity. Efforts to boost trading and avert index deletions — including MSCI’s push for the Indonesian bourse to remove its price floor — have yet to yield results, the people familiar told Bloomberg, asking not to be identified citing confidentiality.

GoTo declined to comment on MSCI’s upcoming review, while MSCI and the stock exchange didn’t immediately respond to requests for comments.

Hans Patuwo, who became GoTo’s chief executive at the end of last year after a campaign by prominent shareholders to remove his predecessor, has vowed to turnaround the company’s fortunes. The company has also weighed a reverse stock-split as a way to boost share prices, after announcing buy-backs of up to 3.5 trillion rupiah (US$196 million or RM801 million) of shares and plans to cancel treasury shares.

“We do not believe that this reflects the fundamental value of the company,” Patuwo told Bloomberg Television in a July 30 interview, referring to GoTo’s share price. “We want to make sure that macro conditions are right so that when we do deploy this money, it will have the desired impact.”

Uploaded by Tham Yek Lee