[Exclusive] 'IPO Giant' Kurly Passes Listing Review on 22nd... Valuation Struggles Inevitable

Preliminary Listing Review at Korea Exchange on the 22nd Expected to Pass Smoothly
'Corporate Value' IPO Price Determination Faces Difficulties... Impact of IPO Market Sentiment Weakening

Kim Seul-ah, CEO of Kurly, delivering a congratulatory speech at the New Entrepreneurship Declaration Ceremony held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Lee Seon-ae] Market Kurly, which is preparing for an initial public offering (IPO) on the Korea Stock Exchange (KOSPI), will finally undergo the preliminary listing examination by the Korea Exchange tomorrow (the 22nd). This examination comes about five months after the preliminary review was requested on March 28. Considering that the average duration for a preliminary listing examination is around two months, it took a considerably long time for Market Kurly to reach this first hurdle for listing. It took time to meet the conditions set by the Exchange, and since it is understood that most of these conditions have been met, the preliminary examination is expected to pass smoothly. However, although the first hurdle for listing will be cleared safely, there are still many challenges to overcome before the final listing. Due to the contraction of the IPO market this year, considerable difficulties are expected in the second hurdle, which is the valuation of the company.

According to the financial investment industry on the 21st, Market Kurly will undergo the preliminary listing examination by the Listing Disclosure Committee of the Korea Exchange on the afternoon of the 22nd. Approval of the examination is expected to proceed smoothly. The main issue in the examination is whether Market Kurly’s management and financial status meet the listing criteria. According to the management performance requirements for listing on the KOSPI, companies that have posted losses can still pass the preliminary examination if they meet certain financial requirements.

The new listing requirements for KOSPI are ▲ sales of 100 billion KRW or more in the most recent fiscal year and a market capitalization of 200 billion KRW or more as of the listing application date ▲ a market capitalization of 500 billion KRW or more as of the listing application date and equity capital of 150 billion KRW or more ▲ a market capitalization of 1 trillion KRW or more as of the listing application date. Meeting any one of these conditions is sufficient.

According to the industry, as of the end of the first half of this year, Market Kurly’s management and financial status are believed to have met the listing criteria. Previously, Market Kurly submitted to the Exchange the mandatory lock-up agreements of financial investors (FIs), which had been an obstacle in the listing examination, along with its performance and financial status for the first half of this year. The mandatory lock-up agreement contains a promise by Market Kurly’s financial investors not to sell their shares for a certain period and to exercise voting rights jointly.

The Exchange, considering that founder and CEO Kim Seul-ah’s shareholding ratio is low at 5.75%, has required Market Kurly to have FIs agree not to sell their shares for at least 18 months and to jointly exercise voting rights over more than 20% of shares. This is because the founder and current CEO Kim holds a very low share ratio, which poses risks to management control after listing, so this is to ensure stable management control for a certain period. More than 50% of Market Kurly’s shares are held mostly by foreign FIs, including Hillhouse Capital (11.89%), Sequoia Capital (10.19%), DST Global (10.17%), Aspect Capital (8.48%), and Euler Capital (6.73%).

A representative from the IB industry said, "Market Kurly has obtained mandatory lock-up agreements from FIs for the listing examination and submitted related documents to the Exchange. It is known that there are no problems with management and financial status, so approval of the examination is expected to proceed smoothly."

Market Kurly has stated that it will proceed with the listing at an appropriate time after the preliminary listing examination is approved. However, some speculate that the listing could be postponed until next year or later.

This is interpreted as due to the current poor IPO investment sentiment in the market. Therefore, even if the first hurdle for listing is passed smoothly, considerable difficulties are expected in the second hurdle, which is valuation. As the market has contracted and companies expected to receive their desired valuations have consecutively given up on listing, investment sentiment remains weak.

This year, companies such as Hyundai Oilbank, SK Shieldus, One Store, and Taelim Paper canceled their public offerings, and companies like Socar that proceeded with listing faced bitter experiences with IPO prices set below expectations and sluggish subscription results. In particular, Socar, like Market Kurly, has only increased sales but continues to post operating losses, and by pushing forward with the listing, it had to give up on a valuation in the trillion KRW range. Ultimately, Market Kurly is also in a situation where it must give up on its desired valuation. The IB industry says that Market Kurly will have to significantly lower its target market capitalization to successfully complete the public offering.

Last December, Market Kurly attracted a pre-IPO investment of 250 billion KRW from Anchor Equity, receiving a valuation of 4 trillion KRW. However, the current market valuation of Market Kurly is only around 1 to 2 trillion KRW.

Yu Seung-woo, a researcher at SK Securities, said, "SSG.com, another e-commerce company, postponed its listing plan to next year, and Oasis is not moving at all for an IPO, contrary to earlier reports. Market Kurly was recognized with a 4 trillion KRW valuation last year when it attracted investment from a Hong Kong private equity fund, but considering the recent market atmosphere, it must be facing many concerns."