Why Did Toss Decide to Head to the US... The Diverging Fates of Companies Listing in the US vs. Korea [Why&Next]

Viva Republica Pursues US Stock Market Listing
Strategy Explained to Gain Recognition for Fintech Company Value
Industry: "Coupang, Kurly, Dusat Bobcat, and Others Are Key Examples"

"Attracting funds from overseas means that national wealth flows into Korea. We will pursue a win-win strategy."

Lee Seung-geon, CEO of Viva Republica (the operator of Toss), a domestic platform company dreaming of becoming a 'decacorn' (an unlisted startup valued at over 10 trillion won), indirectly conveyed the background of pursuing a U.S. stock market listing in this way.

Viva Republica, which operates the mobile financial service Toss, became a unicorn (an unlisted startup valued at over 1 trillion won) in 2018 after raising 90 billion won in investment. Since then, it has steadily taken steps toward an initial public offering (IPO), including being valued at 8.9 trillion won during the Series G investment round in 2022. In the second quarter of this year, it recorded a consolidated operating profit of 2.8 billion won, marking its first quarterly profit since its founding in 2013. Toss is already considered one of the top three fintech (finance + technology) companies, known as 'Nekato' (Naver Financial, Kakao Pay, Toss). If the IPO succeeds, it will provide a more stable foundation to operate its core subsidiaries, Toss Bank and Toss Securities. However, Toss chose to list on the U.S. market rather than Korea. This is interpreted as a judgment that it would be difficult to envision a rosy future for the innovative company Toss through the domestic capital market listing. The biggest reason is understood to be the failure to receive proper recognition of its corporate value.

U.S. Listing vs. Korean Listing: Divergent Fates of Companies

Examples of companies that have struggled between listing in Korea and the U.S. include e-commerce platforms Coupang and Market Kurly. Coupang listed on the New York Stock Exchange in 2021 and has become the company that has brought in the most investment funds to Korea over the past three years. Most of the investment was used to expand logistics centers. Backed by strong financial power, Coupang achieved annual sales exceeding 30 trillion won and operating profit over 600 billion won last year, becoming the number one player in domestic distribution. The number of paid membership 'Wow Membership' subscribers has also surpassed 14 million, showing continued success.

On the other hand, Market Kurly, which was a rival to Coupang in dawn delivery during the COVID-19 pandemic, initially prepared for a U.S. listing but switched to a domestic listing and recently withdrew its IPO after failing to receive sufficient corporate value recognition. The main cause was that major financial investors (FIs) who had invested large sums at high prices during the pre-IPO equity investment exercised veto rights to prevent the IPO when Market Kurly's valuation dropped. Market Kurly had selected Samsung Securities as the lead underwriter six years ago in 2018 and prepared for a domestic listing, but shifted to a U.S. listing after Coupang listed on the New York Stock Exchange in 2021. However, as domestic IPO regulations for unicorns became more favorable, and considering various factors such as the costs of maintaining a foreign stock listing, Market Kurly returned to a domestic listing. Subsequently, it sent a request for proposal (RFP) to major domestic securities firms to select an underwriter for a new listing strategy, but the timing coincided with SSG.com’s listing preparations, leading to poor responses from investment banks (IBs) and a postponement of the underwriter selection. Additionally, the exchange expressed concerns during the preliminary review process about the low shareholding ratio of founder Kim Seul-ah and indicated that passing the review would be difficult without securing friendly FI shares. These various twists and turns caused Market Kurly to miss the optimal timing for listing.

The situation is similar for K-Bank, which recently withdrew its IPO. In June 2021, K-Bank received 725 billion won in investment from Bain Capital, MBK Partners, MG Saemaeul Geumgo, Com2uS, and others. The investment price was 6,500 won per share. Through shareholder agreements, K-Bank promised an internal rate of return (IRR) of over 8% annually until the IPO completion, which roughly means it needed to list at around 8,400 won per share. The problem was that in the recent demand forecast, orders came in at levels far below the lower end of the expected public offering price range (9,500 to 12,000 won). Even considering the recent cooling of the public offering market, K-Bank could not simply propose a market-friendly price. An industry insider analyzed, "The biggest reason for reluctance to list on the Korean stock market is that investors in unicorns cannot receive sufficient corporate value to recover their investments in Korea’s narrow market."

Doosan Bobcat as Doosan Group's 'Playground'... What If It Had Listed in the U.S.?

Another reason companies consider leaving Korea for U.S. listings can be inferred from the case of Doosan Bobcat. Established in 1947, Doosan Bobcat is the global number one small construction equipment company centered in the U.S. Doosan Group acquired it in 2007 and listed it on the Korea Exchange in 2016. It is an unusual case of a U.S. company listing in Korea.

More than 70% of Doosan Bobcat’s sales occur in North America, and two-thirds of its management are foreigners. Quarterly results are also announced in U.S. dollars. Doosan Bobcat is currently classified as undervalued in the Korean market. When preparing for listing, Doosan Bobcat considered both the U.S. and Korea but decided on Korea against the advice of U.S. investment experts. Experts evaluate that if Doosan Bobcat had listed on the New York Stock Exchange, it would have been recognized with a much higher corporate value than now.

The reason for listing a U.S. company in Korea, apart from corporate growth potential, is that it is easier for the headquarters to manage and supervise. In fact, despite recent shareholder opposition, Doosan Group proposed a governance restructuring plan to separate Doosan Bobcat from Doosan Enerbility and transfer it under Doosan Robotics, where the controlling shareholder has a higher stake. An IB industry insider said, "If Doosan Bobcat had listed on the U.S. stock market, would the current decision ignoring severe shareholder opposition have been possible? Looking back, the decision between listing on the domestic and U.S. stock markets significantly influenced Bobcat’s fate. If Bobcat had chosen the U.S. listing, it would have become a company comparable to Caterpillar, the leading heavy equipment company in the U.S. market today."