GoTo shares drop as the company unveils a $5.8 billion loss after selling its e-commerce platform to TikTok

GoTo, Indonesia's biggest tech company, hit a milestone in the most recent quarter, achieving its first-ever positive earnings before interest, taxes, depreciation and amortization (EBITDA). The superapp provider reported 77 billion Indonesian rupiah ($4.9 million) in EBITDA, compared to a 3.1 trillion rupiah ($197 million) loss a year earlier.

But the good news was overshadowed by the revelation that GoTo reported a net loss of 90.5 trillion rupiah ($5.75 billion) for its full financial year, double last year's figure. The huge loss was driven by a $5 billion goodwill writedown after the company announced it was selling its Tokopedia e-commerce platform to TikTok last year.

GoTo shares dropped over 9% in Wednesday trading.

In December, ByteDance, the owner of TikTok, bought a 75% share of Tokopedia, GoTo's e-commerce platform. ByteDance also said it would invest over $1.5 billion into the new joint venture.

TikTok positioned the deal as a solution to an Indonesian government ban on online shopping on social media platforms announced in September 2023. Jakarta argued the ban was needed to protect small businesses from a flood of cheap goods. (These businesses contribute about 60% of Indonesia's GDP.) Yet the ban threatened TikTok's budding social e-commerce platform in the Southeast Asian country.

The deal suited both parties: GoTo would gain a consistent revenue stream in the form of a service fee from the new Tokopedia joint venture, while TikTok gained a platform to operate its e-commerce platform in Indonesia. GoTo CEO Patrick Walujo also said the deal happened because Tokopedia was losing market share and needed a large investment to grow and survive.

Yet regulators may not be appeased. Teten Madsuki, the Indonesian minister for cooperatives and small and medium enterprises, said that TikTok is still violating local regulations by allowing direct transactions on social media, according to CNBC Indonesia.

Some good news

The quarter ending Dec. 31, 2023 is the first time the Jakarta-based group has achieved a positive Ebitda (a metric favoured by loss-making tech companies), which came off the back of two massive job cuts.

Positive adjusted earnings also marks a step in the right direction for GoTo’s profitability targets. The group, which is backed by Japan’s Softbank and Singapore’s GIC, said it wanted to achieve profitability on an adjusted basis by the end of 2023 to show the ride-hailing and e-commerce company has long-term earnings potential.

GoTo also announced a share buyback of up to $200 million, subject to regulatory approval. GoTo shares are down over 80% from its IPO in April 2022.

This story was originally featured on Fortune.com