This Week in Asia #5: TikTok & Tokopedia M&A completed in Indonesia and Byju Alpha Bankruptcy in the US

Leong Chung Wei Bernard -

Our Week 5 continues with the lack of confidence and growing scepticism in China equities from the US investors tanking the market with a $2 trillion loss. India's most prominent startup unicorn, Byju, filed bankruptcy for its US unit and the M&A transaction between TikTok and Tokopedia was completed in Indonesia. To crack the week before the Year of the Dragon, we examined Grab's year of efficiency by dropping out of a deal and more cracks are appearing in the Vizzio Technologies post-CEO's exit. The moment of Zen: Chew Shou Zi, CEO of TikTok told a US Senator repeatedly that he is a Singaporean.

What we are reading this week:

China

  • ‘Uninvestable’: China’s $2tn stock rout leaves investors scarred by Hudson Lockett and Joseph Cotterill from Financial Times. Our take: This highlights the deep crisis in the Chinese stock market, with a staggering $2 trillion loss in value and growing investor scepticism. Despite the Chinese government's forceful measures to stabilize the market, over 40% of investors at a Goldman Sachs conference in Hong Kong deemed Chinese equities "uninvestable." This sentiment stems from prolonged market losses, underwhelming economic growth, a lingering property sector crisis, inadequate government market support, and strained Sino-U.S. relations. The shift in investor perception, from viewing China as a lucrative opportunity to now associating it with heightened risk and instability, reflects the impact of President Xi Jinping’s policies on the technology sector and financial markets. Offshore investors continue to sell Shanghai- and Shenzhen-listed stocks, indicating a persisting reluctance to engage with the Chinese market amid these complex geopolitical and economic uncertainties.
  • Evergrande liquidation to test Hong Kong’s legal reach in mainland China by Thomas Hale and Kaye Wiggins from Financial Times. Our take: This move marks a significant phase in the company's collapse and is set to test the legal reach of Hong Kong's courts in mainland China. The outcome of this liquidation, including the recovery efforts of international investors, depends largely on the attitude of authorities and courts in mainland China, where most of Evergrande's liabilities and homebuilding activities are located.
  • Western nations need a plan for when China floods the chip market by Chris Miller, author of Chip War in Financial Times. Our Take: Despite a predicted oversupply, China's leading chipmaker, Semiconductor Manufacturing International Corporation (SMIC), is significantly boosting its production capacity, backed by substantial government subsidies. This expansion, focusing on foundational processor chips used in various consumer goods, raises concerns among global trade policy officials about the possibility of China flooding the market, potentially driving down prices and impacting Western companies' profits. The U.S., Europe, and Japan are considering responses to this anticipated overcapacity, with options ranging from tariffs (despite administrative challenges) to subsidizing non-Chinese chips, limiting market access for specific Chinese companies, or outright banning Chinese chips in critical infrastructure. The issue has evolved from being a mere subject of economic debate to a prominent topic in G7 policy discussions, with implications for both trade and security.

India

  • Byju’s Alpha Unit Files for Chapter 11 Bankruptcy in Delaware by Steven Church and Jeremy Hill from Bloomberg. Our Take: In an astonishing twist of financial acumen, Byju's US division, a segment of the Indian edtech giant, has gracefully filed for bankruptcy protection. It seems the division, Byju’s Alpha, has adeptly defaulted on a mere $1.2 billion in debt. How quaint! The CEO of Byju’s Alpha, Timothy Pohl, in a grand revelation, stated the company lacked funds to continue its disagreement with its parent firm over the debt. Meanwhile, Byju's Alpha is also preparing to sue a minor Florida-based hedge fund, accusing it of assisting in concealing over $500 million in cash from creditors. In a display of transparent accounting, Byju’s Alpha declared assets of at least $500 million and liabilities of at least $1 billion. The parent company, Think and Learn, is admirably looking to raise $200 million to support its continued quest for growth and operational sustainability. Byju's collapse looks ominous for the startup unicorns in India.

Southeast Asia

  • GoTo’s Tokopedia and TikTok Shop Indonesia merge by Amanda Cua from Backscoop. Our Take: TikTok tried to enter Indonesia only to be rebuffed by the regulatory authorities. They modified their strategy to do an acquisition of Tokopedia so that they could launch a TikTok shop there. This is the cost of doing business as compared to India which continued to ban them.
  • Delivery Hero denies the deal to sell Foodpanda to Grab was cancelled by Terence Lee from Tech In Asia. Our Take: In the illustrious year where Grab embraces the noble pursuit of efficiency to dazzle the public markets, it would be quite the curious strategy, wouldn't it, to acquire Foodpanda, which, in a delightful twist of irony, happens to be acquainting itself with losses. After all, in the grand chess game of business, it's only logical to make moves that lead to profitability, or so one would think.
  • More cracks appear in Vizzio CEO’s claims by Collin Furtado, Terence Lee, and Candice Lee from Tech in Asia. Our Take: This whole fiasco reveals a series of fabrications and inconsistencies associated with Jon Lee, the founder and CEO of Vizzio Technologies. Lee admitted to falsely claiming a PhD from the University of Cambridge and was found to have sent a forged certificate to an investor. Further investigation uncovered instances of plagiarism in Vizzio’s promotional materials and discrepancies in the company's client and patent claims. Numerous businesses listed as Vizzio clients denied such relationships, and a discrepancy was found between the number of patents Lee claimed to have filed and those found in public databases. In response to these revelations, Lee stepped down as CEO, and Vizzio announced the appointment of an interim chief executive, signalling a shift in the company's leadership amidst the controversy. Looks like the worst is not over yet.

Our favourite TV moment: Chew Sou Zi responds to Senator Tom Cotton in the US on his citizen status. We are pretty sure that half the panel of US senators failed their geography test by thinking that Singapore is a part of China, instead of being a sovereign country. (Video Credits: Channel News Asia)

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