J&T Share Price Drops, New IPO in Hong Kong Tech – 17 hours ago

Jakarta, CNBC Indonesia – J&T Express’s share price fell 1.33% when it was listed on the Hong Kong stock exchange or IPO on Friday (27/10) today.

The logistics service from Indonesia started trading at 11.84 HKD on Friday morning, after opening at 12 HKD.

J&T Express raised revenues from the IPO worth US$ 500 million or around Rp. 7.92 trillion. This will be the largest IPO on the Hong Kong stock exchange throughout 2023.

Some of the service’s investors are big names such as Chinese technology giant Tencent, American venture capital Sequoia, Chinese private equity firm Boyu, SF Express, and Singapore-based special investment fund firm Temasek.

“In the third quarter of 2023, global IPO activity will still be sluggish due to uncertain macroeconomic and geopolitical conditions. The global IPO ranking in Hong Kong has fallen to 8th position,” according to a KPMG report some time ago, quoted from CNBC International, Friday (27/ 10/2023).

“The Hong Kong market has not recovered as expected. The third quarter will still be slow,” said Irene Chu, partner at KPMG China.

According to reports Reuters, J&T Express initially hoped to pocket US$ 1 billion in funds from the IPO. But the target was cut in half due to weak investor demand.

“Companies looking to IPO are becoming more realistic with their offering prices. The set price could drop by 50% or even 70%,” said Ringo Choi, Asia-Pacific IPO Leader at EY.

China is J&T’s largest market. This logistics service sent almost 83% of its total packages from the Bamboo Curtain country last year.

This is thanks to partnerships with Chinese e-commerce such as Pinduoduo, as well as Alibaba’s subsidiaries (Taobao and Tmall). J&T controls a 10.9 share of the logistics market in China in 2022, according to the company’s prospectus.

In total, J&T will deliver 14.5 billion packages in 2022 in China and Southeast Asia. That figure is up from 11.5 billion packages in 2020.

In Southeast Asia, J&T is the largest logistics service with a market share of 22.5% in terms of package volume sent. Some of J&T’s e-commerce clients are Lazada, Tokopedia, and Shopee.

In 2022, J&T reports profits worth US% 1.57 billion. However, the report was red in the first 6 months of this year with a loss of US$ 666.8 million.

“In the long term, to continue realizing revenue potential and achieving profitability, we plan to further increase package volume and market share, maintain a flexible pricing strategy, control costs, narrow gross losses and increase gross margins, and increase operating leverage,” said J&T in its prospectus.

Circumventing the Law in RI

In its prospectus, J&T explains the risks of their business in Indonesia. Companies owned by J&T in Indonesia are acknowledged to face the risk of violating regulations regarding the negative investment list (DNI). In the current DNI regulations, foreign entity ownership of companies operating in the courier sector is limited to 49%.

J&T Global, in the prospectus, explains how they will register PT Global Jet Express (the name of the J&T Indonesia company) as a domestic capital company (PMDN).

“We conduct our business through affiliated entities in Indonesia, parent companies in Indonesia and their subsidiaries. We have contracts with parent companies in Indonesia, shareholders in Indonesia, both corporations and individuals,” wrote J&T’s prospectus.

The agreement gives J&T Global effective control over affiliated consolidated entities in Indonesia, obtains all economic benefits from Indonesia, and has the option to purchase all shares in the company in Indonesia if Indonesian law allows.

At the Directorate General of General Legal Administration (AHU) of the Ministry of Law and Human Rights, PT Global Jet Express is registered as a company with Domestic Investment (PMDN) status.

However, in J&T’s prospectus, PT Global Jet Express is stated to be 100 percent owned by Winner Star Holding Ltd. Winner Star was then owned by Onwing GLobal Limited, which was owned by J& Global Express Limited based in the Cayman Islands. The controlling shareholder of J&T Global Express is Jet Jie Lie, founder of J&T.

Looking at this case, Hotman Paris & Partners Partner, Frank Alexander Hutapea said, the key to this case is Article 33 of the Investment Law and Article 12 of the Postal Law.

This legal regulation states that business actors are prohibited from making business agreements using other people’s names.

“According to the Postal Law, if a PT is a foreign investor (PMA), being a 49% shareholder is not enough, there are other obligations,” he told CNBC Indonesia.

“Please ask the relevant ministry whether this violates the investment law and ask whether nominations through contractual arrangements are prohibited? and is this a nominee?” said Frans.

This was due to a discrepancy in the prospectus where J&T Global Express previously admitted that it did not have any shares in Indonesia.

It is known that J&T started its business in Indonesia and then slowly expanded overseas by collaborating with several e-commerce companies. J&T provides logistics services to e-commerce Taobao owned by Alibaba Group, retailer Shein to TikTok owned by ByteDance.

[Gambas:Video CNBC]