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Market Kurly's IPO plans dwarfed by SSG.COM's IPO talk

Kurly's RFPs for Korean IPO receive lukewarm response from brokerage firms

By Aug 03, 2021 (Gmt+09:00)

Market Kurly's IPO plans dwarfed by SSG.COM's IPO talk

Kurly Inc., which runs South Korea's online grocery delivery service Market Kurly, has tentatively halted its IPO process, about a month after it announced a U-turn back to a domestic listing. Growing market talk of its bigger rival SSG.COM's possible IPO has taken the shine off the e-commerce unicorn, according to investment bankers on Tuesday. 

Scrapping the US listing plan in early July, Kurly sent requests for proposals for a local listing to major domestic brokerage houses, including Mirae Asset Securities Co., Samsung Securities Co., Korea Investment & Securities Co. and KB Securities.

Contrary to earlier market expectations, the startup received a proposal from just one of the large Korean brokerage houses. Surprised at the lackluster response, Kurly has recently decided to review its IPO manager selection process from scratch.

Behind the sudden reversal in the brokerage companies' stance is growing market speculation that SSG.COM, the e-commerce arm of the country's retail giant Shinsegae Group, might gear up for an IPO sooner rather than later. 

Not only may Kurly's IPO underwriters stand little chance of working for SSG.COM's listing, but also its parent group's other M&A deals because of concerns about possible leakage of confidential information. 

Despite accumulated operating losses, Kurly had remained a darling of institutional investors until it raised 225 billion won ($200 million) in its latest funding round last month. At the time, the gourmet food delivery platform was valued at 2.5 trillion won. Since its inception in 2014, it has raised a total of 640 billion won from investors.

But when it comes to choosing between Kurly and SSG.COM, Kurly may be the less enticing. Brokerage companies are leaning toward the retail titan unit in hopes of securing new mandates from its parent group, which emerged as one of big M&A players with a spate of local buyout deals clinched this year. The group is estimated to have spent over 4 trillion won on acquisitions this year to date.

Shinsegae Vice Chairman Chung Yong-jin speaks at the inauguration ceremony of SSG.COM's baseball team
Shinsegae Vice Chairman Chung Yong-jin speaks at the inauguration ceremony of SSG.COM's baseball team

Its 2021 acquisitions include a baseball club from SK Group for 100 billion won, an online fashion platform for 265 billion won and an 80% stake in eBay Korea for 3.4 trillion won. Last week, Shinsegae purchased an additional 17.5% stake in Starbucks Korea for 473.3 billion won to increase its ownership to a 67.5% stake.

Moreover, Shinsegae's ongoing efforts to leverage and securitize its real estate will likely create a new revenue source for investment banks. 

"Considering the incessant workload from Shinsegae Group, it would be difficult for brokerage companies to take on Kurly's IPO mandate," one of the IB sources told Market Insight, the capital news outlet of The Korea Economic Daily.

Market Kurly quickly gained market share with the introduction of its overnight "dawn delivery" service in 2015. It is now on track to reach 1 trillion won in sales. Its 2020 sales leaped by 123.7% year on year to 953 billion won, despite operating losses widening to 116.2 billion won.

TIMING IS EVERYTHING

In 2018, Kurly appointed Samsung Securities as its IPO manager. But after SoftBank-backed Coupang, the country's No. 2 e-commerce player, made a spectacular New York listing in March of this year, it shifted toward a US listing and hired Goldman Sachs, JPMorgan and Morgan Stanley for a trading debut in New York. 

Its IPO roadshows conducted earlier this year, however, confirmed a tepid market response to the Korea unicorn, according to industry sources last month. For a US IPO, Kurly had targeted over 3 trillion won in its valuation, which failed to draw support from foreign institutional investors.

During that four months of preparing for a US listing, it might have missed out on the right time to go public, according to some bankers. SSG.COM has emerged as a formidable obstacle to its IPO plans, while another domestic rival Oasia Corp. is speeding up its IPO process.

Kurly's founder and Chief Executive Sophie Kim holds a 6.67% stake in the company. Its investors include DST Global, Sequoia Capital, Aspex Management, Millennium Management and South Korea's CJ Logistics Corp. 

Write to Jin-seong Kim at jskim1028@hankyung.com

Yeonhee Kim edited this article.

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