K bank's IPO up in the air due to valuation discrepancy

The headquarters of K bank in Seoul / Courtesy of K bank

By Anna J. Park

Despite K bank's strong determination to go public by the end of this year, the digital bank's targeted IPO schedule remains murky due to discrepancies over the lender's corporate valuation seen by the market and the company.

K bank has been expecting its corporate value to be estimated at around 8 trillion won ($6 billion). The number came from the internet-only bank's main competitor, KakaoBank, whose market cap stands at around 14 trillion won as of this week.

However, the investment banking sector currently views K bank's corporate value at the time of the IPO at around four trillion won at most.

Since the gap in the bank's corporate valuation between the two sides is too big, some market watchers forecast that K bank's KOSPI debut within this year could be pushed back to sometime next year.

The bank's hopes for the listing could also be discouraged further, considering the weak market sentiment at present surrounding the local IPO market.

For example, Socar, a car-sharing business that had earned the status of a unicorn company with its market value surpassing one trillion won since 2020, faced a harsh reality during the recent book-building process for its upcoming IPO. Despite the startup's successful turnaround to generate profits, its market value was slashed to 900 billion won, which is much less than the firm's evaluated value during its last pre-IPO investment rounds.

Under such frigid market conditions, Hyundai Oilbank decided to withdraw its IPO plan late last month. It was the firm's third attempt to list itself on the benchmark KOSPI.

Currently, K bank is waiting for the result of bourse operator Korea Exchange's (KRX) preliminary listing evaluation. Given that the digital bank submitted its application in June this year and it usually takes 45 business days to arrive at a result, the outcome of the preliminary listing evaluation is expected to be announced sometime around this month.

Once it gets the green light from the preliminary round, the book-building process will be conducted, during which a firm's market value will be determined, based on institutional investors' demand for the company's stocks.

The bank now faces two options ― follow through with its IPO plan as scheduled at the price of reduced corporate value, or delay the public offering plan once again ― and experts' views are divided about which one would be better.

“While many corporations are deciding to delay their IPO plans to next year, it remains uncertain whether market conditions will improve then,” Yoo Kyung-ha, an analyst at DB Financial Investment, said. “It might be a better choice to stick to the original plan of completing the IPOs within this year,” the analyst added.

But some market watchers point out that, since the lender could choose the path of capital increase if it really needs an additional capital injection, the internet-only bank may choose the safer path of not risking possible failure by following through with its IPO plan this year.