SK's IPO drive hits snag amid bearish market

SK's headquarters in Seoul / Korea Times file

By Baek Byung-yeul

SK Group's strategy to go public with as many subsidiaries as possible so as to raise cash has hit a snag, after failing to list SK Shieldus and One Store on the local bourse over the past week amid bearish market conditions, according to industry officials, Thursday.

They point out that SK set the valuations of its subsidiaries too high, compared to the market valuations at this time when the global economic situation is growing more volatile, with many countries raising interest rates as well as the expectation of an economic recession during the second half of the year.

Its rapid growth strategy through mergers and acquisitions and listing affiliated companies needs to be slowed down, given that other subsidiaries, such as e-commerce company 11Street, T Map Mobility and SK Ecoplant are also preparing for IPOs within this year or next year, they said.

"Many companies are using the exit strategy of listing subsidiaries on the stock market without much consideration. In particular, this is being done in order to receive high initial public offering (IPO) prices. There are some cases in which comparison targets are set excessively during the book building process, but this approach does not seem desirable as a person working in a similar industry," an official from a local IT company said, on condition of anonymity.

"SK Group also withdrew its listing plans after attempting to list subsidiaries such as SK Shieldus and One Store. As retail investors are highly vocal about companies' reckless listings of their subsidiaries, SK needs to set the value of its affiliated companies correctly and consider the market situation more," the official added.

Another official from a local conglomerate said, "SK Group's efforts to increase the value of the group as a whole by listing its subsidiaries are fully understandable strategies," but then added, "It is regrettable that the group isn't considering the current market situation more closely, because investors are deeply worried that major countries, including the United States, could deliver a series of big-step rate hikes over the next few months."

On May 11, One Store, a homegrown mobile app market platform and subsidiary of SK Group's ICT investment company, SK Square, announced it had decided to withdraw its IPO plan, citing weak investor sentiment.

The mobile app market operator said it had decided to do so after receiving a worse-than-expected response from investors during demand forecasting sessions held on Monday and Tuesday.

The announcement came about a week after SK Shieldus, another subsidiary of SK Square and a security company that provides both physical security and cybersecurity services, abandoned its IPO plan on May 6 for the same reason as One Store.

SK Shieldus said the decision was made after receiving a lukewarm response from investors during a demand forecasting session amid increasing uncertainties surrounding the global economy.

An industry official said "the decision to scrap the IPO plan was made because it would help both companies and shareholders to find better timing and push the IPO again, rather than listing them at a time when the market situation is currently not in good shape."

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