Musinsa, Sono International face IPO uncertainty amid market volatility

Recent volatility in Korea’s stock market is adding uncertainty to the listing plans of companies like Musinsa, as a prolonged downturn could weigh on their valuations and dampen demand for new shares, according to industry analysts Tuesday.

The benchmark KOSPI has largely declined since falling below 7,000 earlier this month, amid concerns over the sustainability of artificial intelligence (AI) spending and the outlook for the semiconductor industry. On Thursday, the index plunged more than 7 percent, triggering both a sell-side sidecar and a Level 1 circuit breaker, which temporarily halted trading.

Such turbulence complicates the initial public offering (IPO) process. Firms must persuade investors that their valuations are justified even as the share prices of comparable listed peers fall. A broader market downturn could also leave newly listed shares trading below their offering prices, eroding their market value soon after they go public.

Musinsa is one such candidate, with an estimated valuation of nearly 10 trillion won ($7.53 billion). The country’s largest fashion platform began preparing for a public listing in September by filing for a preliminary review with the Korea Exchange.

The company operates its flagship online fashion platform, Musinsa Store, the women’s fashion platform 29CM and its private-label brand Musinsa Standard. It has been expanding beyond online retail by growing its offline footprint — with a goal of increasing the number of brick-and-mortar stores to 60 this year — while also pursuing overseas markets.

But physical expansion brings higher fixed costs, including rent and labor, making it crucial for Musinsa to turn sales growth into sustained profits. Its overseas push faces a similar test: International operations must generate enough returns to justify the investment.

“The current valuation being discussed in the market is driven far more by expectations for future growth and the value of Musinsa’s platform than by its current earnings. To justify a valuation of more than 8 trillion won, Musinsa will need to demonstrate that it can grow its earnings further or provide a clearer picture of its business model,” said Cho Kyung-jin, an analyst at IBK Securities.

Sono International, the hospitality arm of Daemyung Sono Group with an estimated valuation of 3 trillion won, faces additional hurdles, including a special tax audit. The company filed for a preliminary review in June, but the audit, along with market volatility, has added uncertainty to its timetable.

E-commerce platform Kurly is also likely to keep a close eye on market conditions. It passed the review in 2022 but postponed its IPO amid weakening investor sentiment and a decline in its valuation.

Ultimately, for large IPO candidates, the challenge will be to show that their valuations are backed by more than growth prospects alone. As volatility persists, investors are likely to scrutinize tangible profitability and expansion costs more closely.

“Rather than focusing on transaction volume or market share alone, investors should pay closer attention to whether earnings growth can be sustained, how profitable the company’s platform businesses are and whether its global expansion can drive further growth,” Cho said.