Indonesia’s richest woman, Marina Budiman, was on an unstoppable streak – she was making $350 million each day, which propelled her net worth to $7.5 billion. But it didn’t last long. Three weeks later, she lost almost half of her net worth after the shares of her company, DCI Indonesia, came crashing down.
She wasn’t the only one hit. Fellow billionaires and co-founders, Otto Toto Sugiri and Han Arming Hanafia, saw their combined net worth soar by over $17 billion only to witness a drastic collapse as the stock price tumbled.
According to Bloomberg, DCI’s market value hit $17 billion on Tuesday, despite generating just $112 million in revenue and $49 million in profit last year. The company’s stock was trading at 416 times its earnings, making it the most expensive stock among comparable firms.
Indonesia’s highly volatile stock market
Indonesia’s stock market is highly volatile and potentially risky for investors. Firms may notice their stock prices skyrocket despite having relatively modest financial performance – sometimes gaining or losing over 1,000 per cent.
One reason behind this is low liquidity. Many Indonesian companies have stocks that aren’t frequently bought or sold. So, when a stock is thinly traded, even small orders can cause big price movements.
Why did DCI shares take a hit?
DCI shares took a hit because 78 per cent of its shares are owned by only four people – Budiman, Sugiri, Hanafia, and billionaire Anthoni Salim. Since most shares are held by a small group, only a tiny fraction is available for public trading. Of the 2.4 billion outstanding DCI shares, just 80,400 changed hands by midday Wednesday in Jakarta, Bloomberg reported.
If we compare DCI with other companies of a similar size in Indonesia, we will see millions of shares traded daily.
“DCI’s price swings are largely a function of its tight free float. Bid-offer spreads are narrow, so any substantial positioning can move the stock significantly,” Bloomberg quoted Mohit Mirpuri, a fund manager at SGMC Capital Pte in Singapore, as saying.
But why did it soar in the first place?
The rapid price hike in DCI’s shares was fueled by investor confidence because of the rising demand for data centers. Investors likely believed that DCI’s business would expand, making its stock more valuable.
Foreign investment has also played a role as global tech giants, including Oracle Corp., are in talks with Indonesia’s government to establish cloud services centers in the country.