Kurly decides to pursue local listing

Kurly CEO Sophie Kim appears in the company's commercial. Courtesy of Kurly

Online grocer's valuation lower than expected

By Park Jae-hyuk

Kurly, the operator of fresh food delivery platform Market Kurly, has decided to pursue a local listing, as its lower-than-expected corporate valuation forced it to scrap its ambitious plan to list on the New York Stock Exchange.

"We had looked into being listed on both foreign and Korean stock markets simultaneously, and decided recently to go forward with our initial public offering (IPO) on the local stock market after a thorough review of our business model and market conditions," it said in a press release.

"Friday's decision was based on our thinking that it is important to share the fruits of corporate growth with our customers and suppliers here. The Korea Exchange's easing of regulations for Korean unicorn firms to offer a domestic IPO was the reason for our latest decision."

In March of this year, Kurly said that it was considering pursuing IPOs in both South Korea and the United States. The company, which launched its delivery service back in 2015, reported 1.2 trillion won in transactions last year. At that time, it said its IPO plans were aimed at taking advantage of the favorable market and attracting funds from foreign investors as a means to better compete with its chief rivals in the country's highly-competitive e-commerce market.

The government and the National Assembly are considering introducing dual-class shares with weighted voting rights, following similar moves by the U.S. financial authorities, so that startup founders can be positioned to better protect their management rights even with a smaller percentage of shares. Currently, a one-share-one-vote regime is required and mandated here. The dual-class share system is expected to help Kurly CEO Sophie Kim continue to retain control of her company with only a 6.67-percent stake.

However, Kurly's efforts to receive the valuation it had hoped for from global investors were ultimately in vain, and the lower figure is regarded as the real reason behind its return to the Seoul market.

According to industry sources, the company initially expected its valuation to be appraised at over 3 trillion won ($2.6 billion), which bolstered an internal assessment to move forward with a U.S. listing. As a reference, Coupang saw a brief hovering of its valuation to over $109 billion in its market debut, after raising some $4.6 billion in the biggest U.S. IPO so far this year.

Contrary to Kurly's expectations, its investors estimated the company's valuation at 2.5 trillion won ($2.1 billion), during the recent "Series F" funding round that only attracted 225.4 billion won ($196 million). Kurly said that Millennium Management and CJ Logistics participated in the latest fundraising round, along with previous investors: Aspex Management, DST Global, Sequoia Capital China and Hillhouse Capital.

"The recent fundraising round proved that we were recognized for prompting consumers to switch to online grocery shopping and producers to adopt data and technologies that can supply better products to customers at reasonable prices," Kurly's CEO was quoted as saying in the statement. Her remarks are seen as an attempt to dispel worries about the company's growth potential.

Before its announcement about the domestic IPO, Kurly had faced doubts about whether it would be the right decision to list in the U.S., given that Chinese online grocers ― MissFresh and Dingdong Maicai ― had failed to lure investors after being listed there.

Competition with Oasis

Market analysts expect that Kurly will face heated competition from now on with Oasis, another online grocer that plans to go public this year at the earliest.

Oasis operates its own fresh food delivery service, Oasis Market, which specializes in early morning deliveries, as does Market Kurly, and posted 9.7 billion won in operating profit last year, while Kurly suffered a 116.2 billion won loss. Its valuation was appraised at 750 billion won, when Unison Capital made a 50 billion won investment earlier this month.

"Kurly has growth potential and has maintained its leading status in terms of sales, but Oasis made a profit, showing rapid growth similar to Kurly a few years earlier," Kyobo Securities analyst Jeong So-yeon said. "Oasis may outperform Kurly a few years from now."

Kurly appears to be in the process of selecting underwriters for the domestic IPO after terminating its contracts with Goldman Sachs, JPMorgan and Morgan Stanley, all of which were selected as underwriters for the U.S. listing.

Because NH Securities and Korea Investment & Securities are involved with the Oasis deal, and Mirae Asset Securities is handling the listing of TMON, KB Securities and Samsung Securities have been mentioned as potential underwriters for the IPO. Samsung Securities lost its status as lead underwriter for Kurly's listing on the tech-heavy Kosdaq earlier this year, as at the time, the online grocer had opted to pursue the U.S. option.