GoTo is in talks with Alibaba over a $1bn sale of its stock which it hopes will bypass a stock crash.
The Indonesian tech giant is sourcing potential backers, including Alibaba Group and SoftBank Group, Bloomberg sources revealed.
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If GoTo succeed in making the sale, it will help to deter investors from selling their shares when the lock-up period expires on November 30th and avoid a big drop in its stock price.
GoTo is in the early stages of talks with investors and the pricing remains open to negotiation.
Nathan Naidu, Analyst at Bloomberg Intelligence, said: “GoTo’s plan to manage share-price volatility, by engaging early investors such as Alibaba and Softbank to sell down their shares, could help prevent a sharp correction.
Another Bloomberg source revealed that, as a further measure, GoTo has been in discussions with some of its investors to persuade them to agree to keeping their shares for a further six months.
A number of major shareholders committed to holding their stakes in the company for eight months, following GoTo first public offering in late March. As a result of the offering, GoTo managed to raise $1.1bn the next month, which successfully avoided a potential fall in stock price that it was facing at the time.
In May, GoTo sought approval from its shareholders to issue shared worth around 10% of its total capital. At the time, a spokesperson told Reuters: “It is common market practice in Indonesia to carry out an annual administrative process that renews previously granted approval for the option to conduct non-preemptive issuances.
“It does not mean we intend to carry out such an issuance at this point in time.”
This turned out to be more than just an option, however, as the entirety of the approved issuances are being put forward in its latest IPO, which is around the same amount that will soon become eligible to be sold on November 30th.
There are some safety nets ahead for GoTo if it is not able to dissuade a major stock sale. Many of the shares eligible to be sold are owned by its employee fund, Alibaba already has a stake of around 8.8%, and SoftBank owns roughly 8.7%.
Deutsche Bank Research analyst ReenaVerma Bhasin remains bullish on GoTo’s position, however: “With roughly US$2.2 billion in net cash balance as of June and annual cash burn of about US$1 billion per annum based on 2QFY2022 performance, we see the possibility that GoTo will need some external financing over 2024-2025. Our forecasts indicate a peak financing requirement of about US$500 million.
“We believe this is a very manageable level of financing, given that the company already has underutilised credit lines of about US$500 million and also has in place shareholder approval for capital issuance (up to 10% dilution) via a non-preemptive rights issue or an international listing,”
“Prima facie, recent investor nervousness appears to overestimate the external financing risks.”
GoTo first announced its plan to launch a private stock sale in late August. The tech company has a market value of $16 billion. In the past six months, GoTo’s share price has dropped by over 40%.
The main reason cited for GoTo’s share price decline is been the prevailing market conditions, which has hit tech companies particularly hard.
Earlier this week, Microsoft made around 1,000 staff cuts following a period of slow growth at the company.
Other major tech companies, such as Netflix, Snap, and Coinbase have also reported lays offs, while Meta and Salesforce have both slowed their hiring. Meta is also planning budget cuts and layoffs are expected.
UC Today recently spoke to Joseph Walsh, Senior Director, Global Marketing at GoTo, at UC Expo 2022 about the company’s recent rebrand and its launch of Connect and Resolve.
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