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Simone drops IPO on weak institutional investor demand

Fails to reach agreement with Blackstone on IPO price cut

By Oct 21, 2021 (Gmt+09:00)

Simone founder and Chairman Park Eun-kwan
Simone founder and Chairman Park Eun-kwan

South Korean Simone Acc. Collection Ltd. has withdrawn its initial public offering plan on lukewarm demand from institutional investors, investment banking industry sources said on Oct. 21.

The IPO’s bookbuilding Oct. 18-19 failed to gain traction. It was just tens of times oversubscribed on the first day, while most institutional investors placed bids at prices lower than the company’s indicative price range between 39,200 won ($33.1) and 47,900 won, according to IB industry sources. Few were known to have pledged to hold its shares for a certain period after listing.

Due to the tepid interest, Simone considered cutting its IPO price to 30,000 won, about 37% lower than the top end of the initial indicative price range. But it failed to reach an agreement with US private equity firm Blackstone Inc., which bought a 30% stake in Simone for 300 billion won in 2015.

A lower IPO price would have slashed its market capitalization to 1 trillion won and the sale of existing shares by some 100 billion won.

The tepid interest in the IPO among institutional investors had been expected to interrupt Blackstone’s plan to pocket up to 320 billion won from the listing, the sources said.

Simone initially aimed to raise up to 401 billion won through the IPO. Blackstone was supposed to take 80% of the proceeds, while the handbag maker was set to get the rest. The financial investor has received about 100 billion won in dividends so far.

The original development manufacturer (ODM) for Michael Kors, Marc Jacobs and Coach failed to attract enough investors for a listing even with a plan to spend 30-40% of its net profit on dividends after listing.

Investors saw the company’s initial IPO prices as excessive, given a limit to growth in the global luxury handbag market, according to the sources. Simone evaluated its corporate value at 2.1 trillion won by applying a price-to-earnings ratio of 30.53 times. The indicative price range was calculated at a discount of 24-37.9%.

“Many institutions seemed to have judged that the IPO prices were too expensive as it has not fully recovered from COVID-19,” said an asset management company source. “More companies are likely to give up listings as institutional investors are growing picky when they select IPOs for investment.”

(Updated following IPO withdrawal)

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

Jongwoo Cheon edited this article.

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