In an attempt to revive its online shopping operations, which have been halted by regulators in Southeast Asia’s largest economy, TikTok, a Chinese company, is investing $1.5 billion to acquire a majority stake in an e-commerce division of GoTo Gojek Tokopedia, an Indonesian company. This is a TikTok investment.
On the 25th of September, Indonesian Trade Minister Zulkifli Hassan issued a ban on e-commerce across all social media platforms. This measure, aimed at protecting small businesses and user data, resulted in the cessation of e-commerce shops on TikTok.
Earlier this year, TikTok, the operator of the popular short video app, entered a select few markets to leverage its sizable user base. This move aimed to compete with rapidly expanding online retailers such as Shein and PDD Holdings’ Temu. The rapid expansion of these competitors was partly fueled by viral marketing campaigns on TikTok investment itself.
GoTo, a company offering financial services, delivery services, and ride-hailing, experienced an 8.3% drop in its shares following the announcement. This decline occurred as some investors decided to cash in on the recent surge in the stock. It was spurred by expectations of a partnership with TikTok.
“We need to see what kind of market disruption will happen after this partnership,” Pilarmas Investindo Sekuritas analyst Maximilianus Nico Demus stated.
Benefits for TikTok
Under the agreement, TikTok will invest $840 million to acquire a 75.01% stake in GoTo’s Tokopedia, Indonesia’s largest e-commerce platform. This investment will include the integration of TikTok Shop’s operations in Indonesia into the larger Tokopedia company.
In a statement released on Monday, the two companies announced that “the strategic partnership will commence with a pilot period which will be conducted in close consultation with and under the supervision of the relevant regulators.”
Indonesia is home to over 270 million people, many of whom are regular users of social media.
TikTok, owned by China’s ByteDance and boasts 124 million users in Southeast Asia, has been actively trying to transform its large user base into a significant e-commerce revenue stream.
According to the companies involved, the deal is expected to be finalized by the first quarter of 2024. As part of the agreement, TikTok investment will provide Tokopedia with a $1 billion note. The note would be of promise to support its working capital requirements.
Both companies stated, “TikTok has committed to investing over $1.5 billion in the enlarged entity over time, in order to provide the future funding required by the business, without additional dilution to GoTo.”
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