Car rental agency

SoCar’s IPO faces lukewarm response from investors

SoCar CEO Park Jae-wook speaks during a press conference at Conrad Seoul in Yeouido, Seoul on August 3. (SoCar)

Amid weak appetite for IPOs, South Korean car-sharing company SoCar is facing a lukewarm response from institutional investors, with a growing possibility that it will join the long list of market debuts. of this year.

According to industry sources, during the two-day bookbuilding period on Thursday and Friday, institutional investors had priced their preferred stock below 34,000 won ($26), below the price range. from 34,000 won to 45,000 won suggested by the company.

The company plans to launch 4.55 million shares, targeting a market capitalization between 1.2 trillion won and 1.6 trillion won.

Following the results of the book construction, which will be announced on Tuesday, SoCar can either lower its IPO price and go public or withdraw its IPO application on the benchmark Kospi. The company is set to launch its IPO for retail investors on August 10-11 with Mirae Asset Securities as its lead underwriter.

In addition to the dramatic slowdown in the IPO market, the car-sharing platform’s IPO pitch has raised overvaluation concerns here.

When pricing the preferred stock, SoCar selected three companies – GoTo, Ovigo and Aurora – although they share little similarity in terms of business portfolios, as major peer groups.

37% of GoTo’s sales are generated through e-commerce transactions. Both Ovigo and Aurora benefit from offering a smart car software platform and self-driving solutions.

But more than 97% of SoCar’s first-quarter revenue came from short-term or even multi-hour rentals.

Industry insiders pointed out that the company had excluded all car rental companies like SK Rent-a-Car and Lotte Rental from the peer group in order to receive a higher valuation.

SoCar CEO Park Jae-wook said at Wednesday’s press conference, “Unlike car rental companies that make a profit selling used cars, we are the only mobility company that operates both a car sharing service and a mobility software company.”

“Additionally, not only did we top global mobility platforms last year in pre-tax profits, but we will be the first mobility company in the world to make a profit starting this year,” Park added.

Sources say companies will need to price their preferred shares more conservatively if they want to debut successfully in the lackluster market.

Compared to the record IPOs of the past two years, major companies that had planned to go public have dropped their IPO plans this year due to undervaluation fears.

Hyundai Oilbank, whose market value was worth 10 trillion won, scrapped plans for an IPO before the book was built, citing it’s difficult to receive an estimate of the current market’s fair value.

Hyundai Engineering, SK Shieldus and One Store withdrew their IPO application after failing to win over less-than-impressed institutional investors.

CJ Oliveyoung, one of the country’s leading beauty retailers, has also postponed its market debut indefinitely, even before filing for preliminary review with the Korea Exchange.

Upcoming lists of major IPOs slated for this year include e-commerce platform Market Kurly, which is expected to reach around 2-6 trillion won. Others include K-Bank, an internet-only bank, and Golfzon County, a golf course operator, receiving value estimates of 6-8 trillion won and 2 trillion won, respectively.

By Byun Hye-jin ([email protected])