Naver's Investment Startup Sale 'Stalled'

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[Asia Economy Reporter Kwangho Lee] Naver is actively pushing to sell shares of startups it has invested in, but transactions are hardly taking place. The goal is to secure cash by selling shares, but progress remains sluggish.

According to the investment banking (IB) industry on the 26th, Naver has put some of the shares of startups it invested in on the market, but the sales process is facing difficulties. At present, transactions seem distant.

The companies Naver is trying to transact with include Bucketplace, the operator of ‘Oneul-ui Jip (Today’s House)’, accelerator Futureplay, software-as-a-service (SaaS) company Inka Entworks, luxury goods trading marketplace Ballan, and Indian fintech company Balance Hero.

Naver significantly lowered the valuations of these companies. Based on the previous investment rounds, they offered prices about 50% discounted compared to fair value on average.

Specifically, discounts applied range from 31% to 58%, such as Bucketplace (KRW 2 trillion → KRW 1.35 trillion), Futureplay (KRW 215 billion → KRW 59 billion), Inka Entworks (KRW 85 billion → KRW 59 billion), Ballan (KRW 325 billion → KRW 135 billion), and Balance Hero (KRW 327.4 billion → KRW 162.5 billion).

After news spread that Naver’s existing shares were released to the market, a consortium of Eugene Asset Management and Biston Equity Partners showed active interest. Accordingly, Eugene Asset Management pushed to establish a secondary fund called ‘Eugene-Biston Institutional Private Fund No.1 (tentative)’ worth KRW 138 billion.

Initially, they planned to complete the transaction of Naver’s existing shares through the Eugene-Biston Institutional Private Fund No.1 within the first quarter of this year. The timing is still valid, but the reality is challenging. They need to secure KRW 137 billion in funds, excluding the KRW 1 billion GP commitment from the management company, but have not found an anchor limited partner (LP) to provide the capital.

Accordingly, instead of buying shares of all five companies at once, they are considering restructuring flexibly by forming separate investment funds for each target company.

An IB industry insider said, “The market senses that even a 50% discounted valuation is still high,” adding, “An additional valuation adjustment of over 50% is necessary.” He continued, “Most of these companies have raised their value by emphasizing cooperation with Naver after receiving investment from Naver. If Naver exits, the bubble will also burst.”

If Naver succeeds in selling its existing shares, it can secure KRW 131.8 billion in cash. With additional discounts applied, the amount could fall below KRW 100 billion. Many in the industry view this as a de facto ‘cut-loss’. Although Naver had positioned itself as a strategic investor (SI) ally of major domestic startups, it is expected to focus more on mergers and acquisitions (M&A)-type investments going forward.