Top fashion platform Musinsa vows to go public with $2.3 bil. valuation

An image of Musinsa's app / Courtesy of Musinsa

Musinsa, Korea's largest online fashion shopping platform, has specified its initial public offering (IPO) conditions, vowing to go public when its market capitalization exceeds 3.2 trillion won ($2.3 billion).

According to the investment banking industry, the online shopping platform agreed with investors to pursue its listing, if two conditions are met: its market cap based on the public offering price must be estimated at more than 3.2 trillion won, and the amount of capital to be raised through the IPO must exceed 110 billion won.

Market watchers point out that holding a specific agreement on IPO qualifications with investors is a rarity in the market, which shows Musinsa's proactive approach to earning the trust of new investors in this round of funding.

The fashion company recently attracted two new investments amounting to 100 billion won each from Kohlberg Kravis Roberts (KKR), a prominent U.S.-headquartered private equity firm, and Wellington Management, a leading global asset management company.

Musinsa's corporate valuation assessed at this round of funding is said to be 3.07 trillion won, excluding stock options. In 2021, the company was estimated to be valuated at 2.5 trillion won in its Series B funding from IMM Investment and Sequoia Capital.

Since its founding in the early 2000s, the company's earnings have been on a steep rise. Musinsa's annual transactional volume by users, including its subsidiaries, was approximately 3.4 trillion won as of 2022, taking the top rank among e-commerce fashion platforms.

Over 7,000 brands, local and foreign, are showcased in its store. The success of Musinsa Standard, the fashion platform's own brand launched in 2017, and the opening of Musinsa Standard flagship offline stores near western Seoul's Hongik University and southern Seoul's Gangnam District have boosted the company's sales growth in recent years.

A promotional image of Musinsa Standard's Fall/Winter 2023 collection / Courtesy of Musinsa

However, the company must show significant improvement in its future growth to meet the IPO qualifications.

Musinsa posted an annual revenue of 708.3 billion won in 2022, an increase of 53.1 percent year-on-year. Yet, the deficit from Soldout, an online resale platform subsidiary of Musinsa launched in 2020 for limited-edition sneakers and streetwear, is now eating up most of Musinsa's lucrative earnings. With the subsidiary's earnings being integrated in Musinsa's consolidated financial statement, the firm's operating profit shrank to a mere 3.2 billion won last year, a whopping 95 percent plunge compared to the previous year.

External economic factors, including rising global interest rates and sluggish IPO markets, can also negatively impact Musinsa's future IPO plans.

Despite such concerns, Musinsa is expected to push forward with its IPO plan for next year, considering a put option ― the right to enforce repayment of the invested principal before the maturity ― agreement with Sequoia Capital in December 2019. The agreement states that the venture capital firm can exercise the put option, if Musinsa fails to go public by the end of 2024. It still is possible to change the conditions of the put option exercise through consultations with Sequoia Capital, but Musinsa is highly likely to aim for the slated listing debut late next year.