Can TikTok’s $1.5 billion investment reignite its E-commerce ambitions in Indonesia?

TikTok has announced a significant investment of $1.5 billion as a way of relaunching its presence in the Indonesian online retail market.

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FILE PHOTO: FILE PHOTO: The TikTok app logo is seen in this illustration taken August 22, 2022. REUTERS/Dado Ruvic/Illustration/File Photo/File Photo

The Chinese ByteDance company, has revealed a mega budget of $1.5 bn allocated as an investment to rejuvenate and reclaim its presence in the Indonesian online shopping industry.

The strategic move was as a result of the Indonesian authorities’ ban of online shopping on social media in Indonesia and shutdown of TikTok Shop in October. For a start, TikTok’s first move in the booming e-commerce industry was affected by this regulatory measure whose aim was to protect small merchants and user data.

The Arguments
TikTok’s intention involves going into a partnership with GoTo, taking up majority shares in Tokopedia, Indonesia’s largest e-commerce platform.

The deal involves TikTok acquiring a 75.01% share in Tokopedia at $840 million and it also incorporates TikTok Shop’s Indonesia business into the expanded Tokopedia enterprise.

This demonstrates that TikTok is keen on capitalizing its vast userbase of 124 million in Southeast Asia towards building a solid e-commerce platform.

Regarding Indonesia’s significant number of active social media users, this cooperation between TikTok and Tokopedia is under supervision by relevant regulators while in the trial stage.

This transaction is anticipated to be concluded in the first quarter of 2024. In this deal, TikTok will raise a promissory note worth $1 billion that will be converted into the notes payable of Tokopedia.

The Facts
TikTok commits more than just the initial investment, promising a total injection of over $1.5 billion into the expanded firm. Therefore, TikTok can finance the business in future as required.

This step has been taken at a time when Indonesia’s e-commerce sector will be worth about $160 million in 2030 compared to $62 million that it is expected to be valued at this year as per Google, Temasek Holdings, and Bain & Co.

As a result of this news, GoTo’s share price fell by about 8.3% as some investors chose to cash out on its previous upturn. TikTok’s investment has been widely studied and discussed in relation to the performance and effects that it has created for Indonesia e-commerce arena.

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