'5 Trillion Won Valuation' eBay Korea, Definitely a Bubble but...

Last Minute Tactical Moves Ahead of Next Week's Main Bid
Only Brokerage, Slow Growth... Overvaluation Controversy Persists

[Image source=Yonhap News]

[Asia Economy Reporter Jo In-kyung] As the main bidding for eBay Korea, which will reshape the domestic e-commerce market, approaches next week, the shortlisted acquisition candidates are crunching the numbers until the last moment. Since this is an opportunity to secure dominance in the distribution market, there is a prevailing atmosphere that the acquisition must be made. However, controversy over overvaluation remains, as eBay is said to be trying to sell eBay Korea at a higher value than Amazon. The candidates are repeatedly deliberating over the bottom line to avoid the "winner's curse."

"Priced as Expensive as Amazon"

On the 4th, a representative from Company A, which made the shortlist for eBay Korea, said, "The selling price demanded by eBay has reached the 5 trillion won range, which is more than 1 trillion won higher than initially expected," adding, "Since they are asking for a valuation higher than US eBay and comparable to Amazon, we are struggling over the bid price."

It is known that eBay is insisting on a market capitalization of 5 trillion won by calculating eBay Korea's price-to-sales ratio (PSR) at about 3.85 times. The problem is that the PSR of US eBay over the past year is only 3.74 times. The world's largest distribution company, Amazon, has a PSR of about 3.87 times. There are criticisms that eBay is applying an excessive corporate value to eBay Korea.

An industry insider said, "After Coupang entered the New York Stock Exchange and its market capitalization soared to as much as 100 trillion won at one point, other e-commerce companies like eBay Korea, which happened to be on the market, were also excessively valued," adding, "Just as Coupang's stock price is not as high as it was at the beginning of its listing, eBay Korea's bubble needs to be removed and reassessed."

No Tangible Assets, Only Brokerage

Unlike Coupang, the open market operator eBay Korea has almost no tangible assets including logistics. This is because it earns money only from brokerage fees generated between sellers and buyers. Its logistics infrastructure consists of only three centers: the existing Yongin Baegam and Incheon logistics centers and the Dongtan logistics center opened last year. Competitor Coupang is estimated to have about 40 logistics centers and more than 150 delivery hubs, while SSG.com already operates over 110 P.P (Picking & Packing) centers including three state-of-the-art automated online-only centers.

A securities industry official said, "When calculating corporate value, the proportion of tangible assets is an important factor, and it is necessary to reflect that eBay Korea's tangible asset ratio is not high." Another reason for the overvaluation controversy is that the e-commerce market is rapidly shifting from open markets to direct purchasing. The domestic e-commerce market has grown 198.9% over the past five years, but eBay Korea's sales increased by only 62.6% during the same period.

Overlap among paid subscribers is also a concern. Currently, eBay Korea operates Smile Club, a paid membership program with 3 million loyal customers. However, Coupang's Rocket Wow membership has exceeded 4.7 million, and Naver Plus subscribers have also surpassed 2.5 million. The distribution industry estimates that a significant number of members are overlapping subscribers using two or more paid services. Since delivery services such as same-day and dawn delivery themselves are differentiated, there are also comments that eBay Korea is relatively lagging behind.

An industry insider said, "Unlike in the past, delivery and content, rather than price and products, are being evaluated as competitive advantages, so there is no choice but to criticize eBay for setting the valuation too high," adding, "Whoever acquires it will greatly expand their dominance in the e-commerce market, but concerns about the winner's curse remain."