Market Kurly, TMON review IPO through SPAC merger

Market Kurly's CEO Sophie Kim talks to reporters during a press conference held at the company's headquarters in Seoul, in this 2019 file photo. Yonhap

By Kim Jae-heun

Local e-commerce firms Market Kurly and TMON are considering going public on the American stock market through a special purpose acquisition company (SPAC) merger.

“SPAC” refers to a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO), for the purpose of acquiring an existing company.

If the two firms decide on a back-door listing by combining with a shell company, they will be the first Korean companies to do so in the United States. Market Kurly and TMON are currently seeking legal advice related to tax issues. They are planning to get listed on the New York Stock Exchange possibly within this year.

SPAC mergers have been a popular trend for private investors, due to the more convenient IPO procedure compared to that of a general IPO.

Such a merger allows individuals to receive their investment back at the level of its initial issuance, if they fail to find a company eligible for the deal in the United States within two years.

This arrangement also gives the Korean firms less burden over raising funds through an IPO, and can save them time and costs simultaneously.

Market Kurly and TMON are still showing consecutive losses from aggressive marketing and from what Coupang achieved in March ― when it recorded a total 100 trillion won of market capitalization upon its IPO on the NYSE ― making going public in America more realistic for the two companies. Unlike the Korean Stock Exchange, which prioritizes a corporation's profitability when it reviews listing a company, Nasdaq and the NYSE place more importance on the potential for growth.

However, there is the opinion that an SPAC merger won't be easy, as it involves an international M&A deal that entails a complicated approval procedure from local financial institutions, along with tax problems.

Market Kurly is almost certain of its IPO in the United States. It has already chosen Goldman Sachs, Morgan Stanley and JP Morgan as its leading underwriters, and it has adopted international accounting methods to prepare for an American stock market debut. The online grocer's public offering price is expected to attract a considerable amount, as its annual sales reached nearly 1 trillion won in 2020.

Meanwhile, Market Kurly has set its enterprise value at the level of 3 trillion won recently, after it proceeded with its marketing to new investors.

Last year, it had a 116.2 billion won in operating losses for a now-accumulated deficit of 270 billion won.

For TMON, the outlook is that an IPO within this year for the company looks difficult, as its annual sales has been declining for two consecutive years. In 2020, its annual sales figures decreased by 14 percent, recording 151.2 billion won in total annual sales, year-on-year.