S.Korea’s IPO market sours as Kurly postpones listing

South Korea’s initial public offering market has soured as gourmet food delivery platform Kurly Inc. delayed its listing amid deteriorating investor sentiment on the local stock market.

Other local companies with IPO plans such as Golfzon County Co. and Kbank are also facing difficulties in determining their listing schedules, casting doubts over whether they could go public this year, given the sluggish domestic stock markets.

Kurly on Wednesday announced its decision to postpone a listing on the country’s main Kospi as a slowing global economy dampened investor sentiment.

“We plan to seek a listing again at the best time when the corporate value can be fully and properly evaluated,” said the startup. “We have enough cash to carry out the new businesses we are planning without any difficulty.”

The decision came as Kurly’s valuation tumbled due to subdued stock markets. The platform had been valued at up to 4 trillion won ($3.1 billion) in December 2021 when it received 250 billion won in pre-IPO funding from Anchor Equity Partners, a Hong Kong-based private equity firm.

“The existing investors had no choice but to lose money if Kurly had pushed ahead with the listing this year,” said an investment banking industry source. “The more startups attracted investment, the more difficult their listings became.”

VALUATION PLUMMETS

Kurly, a pioneer in South Korea’s dawn delivery service market, had aimed at a market capitalization of 7 trillion won after the planned listing.

But its valuations nosedived as shares in major domestic platform operators such as Socar Inc. and Kakao Pay Corp. lost ground. Kurly’s market capitalization dropped to around 1.1 trillion won in the local over-the-counter market, slightly higher than 900 billion won, which it has so far raised from investors.

The company was expected to seek another funding round rather than a listing to help the existing investors, who bought its stake when its value was high, exit, investment banking industry sources in Seoul said. It was known to consider various measures to attract new investors including the refixing option, an adjustment right of the conversion price embedded in equity-linked debt when the underlying stock price falls below the conversion price.

Kurly, however, is likely to seek steps to minimize the dilution of founder and CEO Sophie Kim’s stake of 5.75% with the funding round.

GLOFZON COUNTY LIKELY TO FOLLOW SUIT

Golfzon County, a major golf course operator, is also likely to postpone its listing plan, according to investment banking industry sources.

The company needs to submit a securities registration statement by Jan. 6 to the Financial Services Commission to go public in the first half, given the 135-day rule in the US, which requires an auditor to provide a negative assurance comfort letter if the cut-off date for the letter is within 135 days of the last audited financials or the date of the last reviewed interim financials.

Golfzon Country, the enterprise value of which was estimated to be more than 2 trillion won, is expected to raise at least 400 billion won from the planned IPO. The offering will likely need to be marketed in the US, the world’s largest capital market, to find enough investor demand.

A South Korean company aiming to attract US investors for a listing in the first quarter must complete the process of its public offering and investors’ payment for shares by Feb. 11, 135 days after Sept. 30, 2022, the last balance sheet date for which audit or review can be performed. The company needs to start the process early this month, considering other procedures such as a bookbuilding and a retail subscription.

Golfzon County got the preliminary nod for a listing from the Korea Exchange, but the approval is valid only until Feb. 22. Once the approval expires, the company needs to submit an application for a preliminary review of its IPO plan again to the exchange, which means it could go public in the second half.

WHAT ABOUT KBANK, OASIS?

Kbank, an online bank in the country, and Oasis Corp., a local grocery delivery platform operator, are likely to seek listings this year, brokerage industry sources said.

Kbank CEO Seo Ho-sung said in his new year speech said it would push ahead with an IPO process in 2023, prompting expectations that the bank will start the listing procedures once the local stock market recovers.

But investment banking industry sources doubted if both companies could attract enough investors, given tepid sentiment.

In the last year, 15 companies have dropped IPO plans, according to industry sources.

Hyundai Oilbank Co., a South Korean refiner backed by Saudi Aramco, and Hyundai Engineering Co., the plant engineering and construction unit of South Korea’s Hyundai Motor Group, withdrew listing plans in the first half of 2022. One Store Co., South Korea's homegrown app store, and SK Shieldus Co., a security service provider, also abandoned their IPOs. Most of them were units of major conglomerates and made such decisions due to disappointing IPO prices on weak demand.

The conditions deteriorated further in the second half as companies failed to raise as much money from institutional investors as targeted. E-book platform Millie’s Library dropped its listing plan in November.

“More investors are taking conservative stances as many institutions suffered losses from IPO stocks last year,” said an asset manager. “Unless local stocks recover, the IPO market will remain sluggish.”

Write to Ye-Jin Jun at ace@hankyung.com
Jongwoo Cheon edited this article.