Indonesia on Tuesday announced a new regulation that allows tech companies to issue multiple voting shares when conducting an initial public offering on the country’s stock exchange, paving the way for local tech giant GoTo to come to market.
Under such a dual class shares framework, certain shares have more voting rights than others, allowing holders—typically corporate founders—to retain directional control of their company, and is a common practice among startups in the US.
The new Financial Services Authority regulation, in effect since December 2, is aimed at incentivizing the country’s fast-growing tech companies to list on the Indonesia Stock Exchange (IDX) as it seeks to increase its attractiveness to both domestic and international investors.
The authority, known by its Indonesian acronym OJK, said in a statement that the change is “an effort to encourage financial market deepening, especially the capital market sector” by accommodating tech companies aiming to list on the stock exchange.
Experts say that tech shares especially appeal to millennials and younger Indonesians, who make up about 80% of retail investors on the IDX.
The regulation stipulates that companies that can issue shares with multiple voting rights must “use technology to create product innovations that increase productivity and economic growth and have broad social benefits.” They must also, among other stipulations, have at least IDR 2 trillion (USD 139 million) in total assets and a compound annual growth rate in revenues over three years prior to listing of no less than 30%.
Eligible shareholders will be allowed multiple voting rights over 10 years, which can be extended for another decade if approved in a general shareholders meeting.
GoTo—Indonesia’s biggest private tech company—was formed after a merger between superapp provider Gojek and local e-commerce group Tokopedia. It was initially looking to list on the IDX by the end of this year, but had to push that back to 2022 as it waited for the regulation to be issued. With that now announced, GoTo can accelerate its IPO process.
Grab, GoTo’s Singapore-based rival which recently listed on the Nasdaq in the US, has made use of multiple voting shares. Grab management owns only around 3% of its overall shares but controls 60% of voting rights.
Anthony Tan, Grab’s founder, said in a recent interview with Nikkei Asia that such voting rights help “us stay very focused on a double bottom line and on our long-term mission and strategy.”
As of early this month, as many as 43 companies had debuted on the IDX this year. The biggest IPO was that of e-commerce group Bukalapak. It raised IDR 21.9 trillion in August, the local bourse’s largest IPO ever.