Market Kurly clouded by cash shortage issues

By Baek Byung-yeul

Kurly, operator of fresh food delivery platform Market Kurly, announced recently it would seek a listing on either the U.S. or local stock market within the year at a time when competition in the local e-commerce industry is increasing

The move for an initial public offering (IPO) comes after Coupang, a SoftBank-backed e-commerce company, debuted successfully on the New York Stock Exchange (NYSE), March 11 and raised around 5 trillion won in funding.

However, industry officials said Monday that any IPO attempt won't be as easy as Coupang's listing, as its business model is not really distinguishable from that of its competitors and the company doesn't have a reliable investor like SoftBank.

“After Coupang had a successful IPO on the NYSE, Kurly is also considered one of the candidate companies that can seek a listing in the U.S. But the market situation for the company is not that optimistic, as traditional retail powerhouses such as Lotte, Hyundai and Shinsegae are expanding into the fresh food delivery market here,” an industry official said.

Established in 2014, Market Kurly has emerged as one of the country's fastest growing online grocery delivery platforms, centering on fresh foods. Thanks to its early morning fresh food delivery service, the company is expected to announce sales of nearly 1 trillion won ($879 million) for last year, more than double that for 2019, which reached 428.9 billion won.

However, the figure is considerably smaller than that of Coupang, which is expected to announce more than 21 trillion won in sales for 2020. Kurly is also expected to post an operating loss of around 100 billion won for last year ― it also recorded an operating loss of 98.6 billion won in 2019.

Kurly is reported to have been considering seeking an IPO because of the unusually ample liquidity on the stock market. The company's value is estimated at around 1 trillion won.

CEO Sophie Kim unveiled her plan during a senior executive meeting in February. She was cited as saying “we could lag behind in the market if we fail to launch an IPO within the year because the local e-commerce market is reshuffling in favor of big players.”

The number of Market Kurly users increased 179 percent year-on-year to 3.9 million at the end of 2019, from 1.4 million at the end of 2018. Kurly said its Market Kurly service also succeeded in securing loyal customers as the repurchase rate reached 61.2 percent in 2019, more than double the average repurchase rate of TV home and internet shopping businesses.

Regarding the IPO, a Kurly official said “nothing has been decided on yet.”

The official added, “As our CEO said, we are trying to launch an IPO within this year. But all possibilities are open as we have not yet decided on which stock market we are going to list our shares.”

The company official denied the speculation that Kurly was seeking an NYSE listing due to its dual-class shares system, saying it was looking for a market that can ensure its value appreciates.

While a one-share-one-vote regime is mandated in the Korean stock market, the NYSE supports a dual-class shares system, helping startups raise investments without concerns about protecting their management rights.

For example, Coupang issued two classes of common shares ― Class A with one voting right and Class B with 29 voting rights, and the Class B shares were given only to the company's CEO Kim Bom-seok.

“The dual-class shares system is not our concern when we think about an IPO. If our final decision is to be listed in the U.S. that will be because the stock market there will appreciates our company's value,” the official said.