Korea Exchange seeks pre-IPO steps to protect Kurly from takeover

Market Kurly CEO Sophie Kim / Courtesy of Market Kurly

By Kim Jae-heun

The Korea Exchange (KRX), the country's top bourse operator, has decided to request Market Kurly's major shareholders to exercise joint ownership of the company's shares while limiting them from selling stocks following the online grocery service's initial public offering (IPO).

The KRX wants to make it clear that the online retailer's initial public offering (IPO) here is possible as long as Kurly's CEO can maintain management control.

Market Kurly CEO Kim Seul-ah, or Sophie Kim, only holds 7 percent of the company's shares and the bourse operator isn't ruling out the possibility that foreigner shareholders who have invested in Kurly with the hope of its successful IPO may sell off their holdings right after the listing. Local and overseas private equity funds (PEFs) are even said to be bracing for the possibility of a "hostile takeover" of Market Kurly.

"If the company's management continues to falter and thus, becomes unstable, investors could suffer financial and monetary damage when it gets listed. Based on that rationale, the KRX hopes Kurly to form a joint ownership and restrict shareholders from selling shares individually," a source from an investment bank said.

The bourse operator usually asks a joint owner to possess 20 percent of the shares. However, specific shareholding percentages have not been set for Market Kurly.

Shares owned by major investors will be kept at the Korea Securities Depository and an individual party will not be able to sell its stocks unilaterally. The KRX sees Kurly CEO Kim's management control to become more vulnerable as other major shareholders hold bigger or at least equal amounts of shares.

Sequoia Capital China and Hillhouse Capital, both from the mainland of China, own 13.84 percent and 12.03 percent of Market Kurly's share, respectively. Aspex Capital from Hong Kong also holds a 7.6 percent of stake. Russian venture capital DST Global and Euler Capital from the United States own 10.69 percent and 7.81 percent stakes, respectively.

Meanwhile, Kim's share fell below 6 percent after receiving a Series F investment of 225.4 billion won recently. But some view the Kurly CEO will likely keep her management rights as the company's major shareholders are mostly "financial" rather than "strategic" investors.

"Currently, the board of directors trusts Kim's capability of running the company and there is a system such as a joint management agreement that alleviates concerns over Kim being deprived of her CEO position," a Market Kurly official said.

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