Amid dampened appetite for initial public offerings, South Korean car-sharing company SoCar is facing lukewarm response from institutional investors, with a growing possibility that it may join this year’s long list of market debut flops.
According to industry sources, during the two-day book building period on Thursday and Friday, institutional investors had written their preferred share price below 34,000 won ($26), lower than the price band of 34,000 won-45,000 won suggested by the company.
The company plans to float 4.55 million shares, aiming for a market capitalization of between 1.2 trillion won and 1.6 trillion won.
Following the book building results, which will be announced Tuesday, SoCar can either lower its IPO price and go public, or withdraw its application for a market debut on the benchmark Kospi. The company is scheduled to launch its IPO for retail investors on Aug. 10 and 11 with Mirae Asset Securities as the main underwriter.
In addition to the dramatic slowdown of IPO market, the car-sharing platform’s IPO pitch has raised concerns of overvaluation here.
When setting the preferred share price, SoCar selected three companies -- GoTo, Ovigo and Aurora -- although it shares little similarities in terms of business portfolios, as major peer groups.
GoTo’s 37 percent of sales is generated through e-commerce transactions and both Ovigo and Aurora profit from offering a smart car software platform and self-driving solutions.
But more than 97 percent of SoCar’s first-quarter sales revenue came from short-term rentals -- even several hours.
Industry insiders pointed out that the company left out any car rental companies like SK Rent-a-Car and Lotte Rental from the peer group in order to receive a higher valuation.
SoCar CEO Park Jae-wook said at Wednesday’s press conference, “Unlike car rental firms who make profit through selling used cars, we are the only mobility company that operates both car-sharing services and a mobility software business.”
“Also, not only have we last year surpassed global mobility platforms in terms of pre-tax profits, but will be the first mobility company in the world to turn a profit starting this year,” Park added.
Sources say companies will have to set their preferred share prices more conservatively if they wish to make a successful debut on the sluggish market.
Compared to the record-breaking IPOs during the last two years, major companies that had planned to get listed ditched IPO plans this year due to fears of undervaluation.
Hyundai Oilbank, whose market value was worth 10 trillion won, scrapped its IPO plan before the book building, citing that it is difficult to receive fair value estimate from the current market.
Hyundai Engineering, SK Shieldus and One Store withdrew its IPO application after failing to convince less-than-impressed institutional investors.
CJ Oliveyoung, one of the country’s leading beauty retailers, also indefinitely postponed its market debut, before even applying for a preliminary review with the Korea Exchange.
Upcoming listings of major IPOs scheduled this year include the e-commerce platform Market Kurly, which is expected to reach around 2-6 trillion won. Others include K-Bank, an internet-only bank, and Golfzon County, a golf course operator, receiving value estimates of 6-8 trillion won and 2 trillion won, respectively.
By Byun Hye-jin (email@example.com