'Socar's "1 Trillion Value" Collapse, Reason for Proceeding with IPO: "Limitations of Mobility Business"'

100 Billion Won Funding Planned
Insufficient Funds for Sole M&A
Considering Joint Acquisition with FI

[Asia Economy Reporter Kwangho Lee] Comprehensive mobility platform company Socar is proceeding with its planned stock market listing. Attention is focused on the background of raising funds within the year even at the cost of lowering its valuation from being a 'unicorn' valued at over 1 trillion won.

According to the investment banking (IB) industry on the 10th, Socar began its public offering schedule from this day. The offering volume is 3.64 million shares, and the offering price was fixed at 28,000 won per share. The total offering amount is 101.92 billion won. Applying the fixed offering price, Socar's valuation is 966.6 billion won.

As a result, the valuation is lower than the 1.3 trillion won recognized during Lotte Rental's equity investment in March. Prior to Lotte Rental, Socar first surpassed a valuation of 1 trillion won and became a 'unicorn' during the Series E investment round in 2020, which involved venture capital (VC) Songhyun Investment and private equity fund (PEF) operator SG Private Equity (SG PE), but the 1 trillion won ceiling has now collapsed.

Post-Valuation 1.3 Trillion
Valuation Lowered to 900 Billion Range

When market liquidity was abundant, valuations of 2 to 3 trillion won were discussed, drawing attention as a 'big catch,' but currently, some financial investors (FIs) are concerned about losses due to the lowered valuation. This is a different move compared to many unlisted companies that are taking more time before pursuing IPOs.

Socar CEO Jaewook Park recently said at an IPO press conference, "It is true that market conditions are difficult, but since the mobility market is undergoing a rapidly changing important period, going public now is the best option." He added, "60% of the public offering funds will be used for mergers and acquisitions (M&A) of companies capable of expanding the car-sharing business and those with technology and sales networks related to new businesses."

The reason Socar is pushing for an IPO while lowering its valuation amid unstable market conditions lies in the uncertain mobility business. Just a few years ago, the mobility sector was regarded as a next-generation growth sector. Investment reviewers in this field competed to invest, and as related companies increased, the market expanded. However, the current market is viewed by the investment industry as stagnant.

Continued Operating Losses on a Separate Basis
Stagnant Mobility Market

The problem is that it is not profitable. Socar recorded an operating profit of 1.4 billion won on a consolidated basis in the second quarter of this year. Although it escaped operating losses, this was due to the performance of subsidiaries such as Esca and Nine to One. On a separate basis, there is still an operating loss of 1 billion won. It has yet to escape the deficit pit.

Accordingly, Socar plans to diversify its business areas by using the incoming public offering funds to conduct M&A and equity investments with companies within the mobility value chain. The goal is to strengthen capabilities in various fields such as car-sharing, electric bicycles, shared parking platforms, KTX, and accommodation, providing comprehensive mobility services covering everything from the start to the final stage of movement.

Although the plan is to create a so-called 'super app' that integrates various services into Socar, the reality is not easy. Initially, Socar planned to raise 4.55 million new shares. Applying the desired offering price range of 34,000 to 45,000 won would have amounted to a maximum of 204.75 billion won, but the confirmed total offering amount is 101.92 billion won. The industry evaluates that the 100 billion won scale of funds Socar will secure is insufficient for attempting M&A.

An IB industry official said, "Considering operating funds, it will be difficult to use the entire 100 billion won for M&A," adding, "Even though company valuations have recently decreased, more funds are needed to acquire companies that can immediately generate business synergy." He continued, "To cover the shortfall, they might partner with FIs and acquire through an SPC, but it will not be easy in the current market."