[IPO Spotlight] Socar, Key Points to Watch for Employee Stock Subscription Success

Demand Forecast August 1-2... 34,000-45,000 KRW
Increase Discount Rate and Expand Voluntary Lock-up
Apply Enterprise Value Calculation Based on Sales

[Asia Economy Reporter Hyungsoo Park] Mobility platform Socar is the first among domestic unicorn companies to pursue listing on the KOSPI market. Amid a chilly atmosphere in the IPO market, attention is focused on Socar's offering price. Socar presented a market-friendly price range for the IPO to ensure subscription success and minimized the circulating shares immediately after listing.

According to the Financial Supervisory Service's electronic disclosure system on the 27th, Socar will conduct a demand forecast targeting institutional investors over two days from August 1 to 2. The price range proposed by the underwriters is 34,000 to 45,000 KRW per share.

The total number of shares offered is 4.55 million, with the offering size based on the upper limit of the price range amounting to 204.8 billion KRW. The final offering price will be confirmed through the demand forecast, and subscription for general investors will be conducted over two days starting August 8. The goal is to list within August.

Mirae Asset Securities, the lead underwriter, and Samsung Securities, the joint underwriter, used EV/Sales (enterprise value to sales ratio) to determine Socar's appropriate corporate value.

The underwriters judged that applying commonly used metrics such as net income or EBITDA to evaluate Socar's corporate value would not reflect the peculiarities of its growth stage and the potential revenue from various mobility services. In Korea, companies like Kakao Pay, K Car, Netmarble, and Samsung Biologics used sales-based valuation methods to estimate appropriate corporate values at the time of their listings.

Ten domestic and international companies were selected as comparables, including mobility platform companies Uber, ride-sharing service providers Lyft and Grab, as well as micro-mobility platform companies Bird Global and Helbiz. The average trading multiple of these ten companies was calculated at 8 times. However, companies with business structures similar to Socar, such as Uber, Lyft, and Grab, had multiples around 2 times, while Goto, Obigo, Wooha Kotei Informatics, and Aurora Innovation raised the average. The trading multiples of Indonesian company Goto and domestic company Obigo were 17.1 times and 18.3 times, respectively.

Applying the average multiple of 8 times, Socar's corporate value was estimated at approximately 2.4 trillion KRW. Reflecting a discount rate of 33.9% to 50.0%, the corporate value ranges from 1.206 trillion to 1.594 trillion KRW. This discount rate is wider than the average discount rate of 22.0% to 35% for newly listed companies on the KOSPI over the past five years. Additionally, Socar increased the voluntary lock-up shares from existing investors to boost subscription success. Major shareholders and related parties agreed to a one-year lock-up, strategic investors to six months, and financial investors to one, three, and six months respectively, resulting in only 16.28% of total shares being available for circulation after listing. This is a smaller proportion compared to the average initial circulating share ratio of 38.8% for companies listed on the KOSPI in the past three years.

It remains uncertain how institutional investors will respond during the demand forecast. The market sentiment at the time of the demand forecast is crucial amid increased volatility in both domestic and global stock markets. After finalizing the offering price, the subscription rate of employee stock ownership associations will also be an important point to watch.

Among companies listed last year, employees of high-profile companies such as Krafton, Kakao Bank, and Kakao Pay who invested in employee stock ownership associations have suffered mental distress. Their stocks have fallen below the offering price, resulting in significant unrealized losses. When SK Bioscience, listed in March last year, surged, there was speculation that employees who invested in employee stock ownership associations would earn hundreds of millions of KRW, but Krafton and Kakao Bank were listed during that period. There was a mood to acquire employee stock ownership shares even by borrowing. However, as the market entered a downturn, optimism about employee stock ownership shares diminished. Employee stock ownership subscriptions close one day earlier than general investor subscriptions and can serve as an important indicator to gauge internal company sentiment.

Jaeuk Park, CEO of Socar, said, "The funds secured through the IPO will be invested to strengthen competitiveness through mergers and acquisitions (M&A) and investments within the mobility value chain, launching new services, and securing technological capabilities."