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IB firms enter tough race for SSG.COM IPO underwriting deal

The bidders to compare the benefits of listing SSG.COM as a standalone firm versus merging it with eBay Korea

By Sep 15, 2021 (Gmt+09:00)

SSG.COM's distribution center for online-ordered products, Shinsegae NEO 003.
SSG.COM's distribution center for online-ordered products, Shinsegae NEO 003.

The race to become the lead underwriter for the IPO of Shinsegae Group’s e-commerce brand SSG.COM is getting fierce. A total of nine institutions have submitted their bids to SSG.COM’s request for proposal (RFP), according to the investment banking industry on Sept. 15.

Six among the participants were domestic firms, namely Korea Investment & Securities Co., NH Investment & Securities Co., Mirae Asset Securities Co., KB Securities Co., Samsung Securities Co. and Daishin Securities Co. Three global firms, namely Credit Suisse, JPMorgan and Citigroup Global Markets Securities, have also joined.

Sources said that most bidders valued SSG.COM at around 10 trillion won ($8.5 billion), while one participant has set the valuation as high as 15 trillion won ($12.8 billion). The 15 trillion won estimation puts SSG.COM’s valuation at about 4 times its gross merchandise value (GMV), or the amount of total annual transaction, of 3.9 trillion won ($3.3 billion) last year. SSG.COM’s rival Coupang’s valuation at the time of IPO stood at about 3 times its annual transaction.

“At first, everyone thought even 10 trillion won valuation was high. But once the actual race kicked off, every firm is raising its valuation and is putting all efforts to win the deal. After all, it’s a deal with the retail giant Shinsegae Group, and e-commerce is still a fast-growing industry,” said an investment banking official.

Bankers note that Korea Investment and NH Investment are less likely to win the deal due to possible conflict of interest with the grocery delivery platform Oasis Corp., for which they are already acting as the IPO underwriters. Mirae Asset, on the other hand, which is the lead underwriter for the social commerce company TMON Inc., is relatively free from such issue as TMON’s business areas do not quite overlap with those of SSG.COM.

KB Securities, as the only firm to have participated in Market Kurly’s underwriter selection process, is also a strong candidate. KB Securities have also led the successful IPO of KakaoBank Corp. earlier this year.

“Among the larger firms, either Mirae or KB will likely be selected. Among the smaller firms, either Samsung or Daishin will be chosen. Some also say that Korea Investment and NH Investment also have some chances as SSG.COM does not consider Oasis as a serious rival,” said an investment banking source.

INNOVATIVE BUSINESS MODEL TO PLAY DECISIVE ROLE

SSG.COM insiders say the bidders that can design more innovative platform-based business models will likely win the deal. Sources report that SSG.COM has asked the bidders to propose ideas to create synergies between SSG.COM, E-Mart Inc. and the recently acquired eBay Korea. Another source said that SSG.COM’s RFP included a task to compare the valuations of SSG.COM when listed alone and when listed after a merger with eBay Korea.

“The SSG.COM RFP was the most difficult one since Krafton earlier this year,” said an investment banking source.

Market watchers note that SSG.COM’s request to provide solutions to such high-level business issues, which would normally be addressed by the management consultants, roots largely from the increasing competition in the domestic e-commerce scene.

In the second quarter of this year, SSG.COM reported the second-largest loss figures in its history due to higher marketing costs. Its second-quarter revenue was 349.5 billion won ($298.2 million), 12% higher than the same period last year, but the operating loss was 26.5 billion won ($22.6 million), almost double that of the same period in 2020 at 13.7 billion won ($11.7 million).

An E-Mart employee packing items ordered through SSG.COM.
An E-Mart employee packing items ordered through SSG.COM.

If SSG.COM decides to go public as a standalone company without a merger with eBay Korea, analysts note that its strategic business ties with Shinsegae Group and eBay Korea must be tight in order to justify its high valuation. SSG.COM’s total transaction last year was about 3.9 trillion won ($3.3 billion), much less than eBay Korea’s 20 trillion won ($17 billion).

“The valuation of 10 trillion won ($8.5 billion) seems reasonable with SSG.COM’s GMV expected to surpass 5 trillion won ($4.3 billion) this year. The consensus among the investment bankers is that rather than spending time and resources for merger with eBay Korea, SSG.COM is better to go public now as a separate entity while the stock market is still soaring,” said an investment banking source.

SSG.COM will make the final selection within October and will notify the participating firms individually.

Write to Ye-jin Jun at ace@hankyung.com

Daniel Cho edited this article.

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