|Kurly CEO Sophie Kim appears in the company's commercial. Courtesy of Kurly|
Major shareholders consider earlier exit from online grocer
By Park Jae-hyuk
Kurly, the operator of fresh food delivery platform Market Kurly, is racing to boost profitability and expand its market presence before being listed on the New York Stock Exchange within this year.
At this moment, an initial public offering (IPO) in the U.S. stock market is considered quite "premature" according to market insiders.
Sources familiar with the issue pointed out that the online grocer has hastened its U.S. IPO drive to cope with its initial group of investors who are preparing to sell their stakes amid skepticism over its long-term growth.
When Kurly raised money from Sequoia Capital, DST and other investors in 2018, they were said to have asked for a drag-along right, which enables them to sell the firm's shares, including Kim's, to a third party, unless it goes public or sells its controlling stake within three years.
Their demand is regarded as the main reason for Kim to hasten the IPO, despite her company's snowballing losses. Kurly's operating deficit grew to 116.2 billion won last year from 101.2 billion won in 2019. Its accumulated deficit stands at around 260 billion won.
"If Kurly goes public without resolving worries about its profitability, retail investors may fall victim to the early-stage investors immediately after the IPO," a securities industry insider said.
In an apparent attempt to maximize its valuation, which is estimated at around 3 trillion won on the over-the-counter market, Kurly is reportedly trying to attract a 300 billion won ($267 million) in pre-IPO investments in collaboration with lead underwriters Morgan Stanley, Goldman Sachs and JPMorgan.
This came after it raised 185 billion won in investments through Series E funding last year and 135 billion won from Series D funding in 2019. It has collectively attracted 420 billion won in investments so far.
However, potential investors are maintaining a "conservative stance" toward Kurly's aggressive fundraising, expressing concerns over a possible overestimation of the company's value, according to industry officials.
"Because investors have doubts about Kurly's long-term growth potential, huge concerns exist over early-stage investors' divestments," a senior investment banking industry source said on condition of anonymity. "Kurly CEO Sophie Kim is causing concerns through her hastened pursuit of the U.S. IPO, which was obviously encouraged by watching Coupang's successful listing."
Regarding concerns over long-term profitability, the CEO said in a press conference in March that the company could consider entering the foreign online grocery market.
Private equity industry sources, however, expect the company to remain as a "niche player," even if it establishes a nationwide network in the U.S. They were also skeptical about its expansion in the Chinese market, due to the country's unstable distribution network.
A Kurly spokeswoman declined to comment on the firm's plan to boost profitability before the IPO and any countermeasures against the early-stage investors' possible divestments.
But the company is set to offer its "dawn delivery" service outside of the Seoul metropolitan area by cooperating with CJ Logistics. The CEO also emphasized at the March press conference that the Korean market is large enough for the company to succeed.