Kakao Mobility IPO put off on business streaming under remedial pressure

[Photo by Lee Chung-woo]

Kakao Mobility Corp., a dominant car-hailing platform under South Korean app giant Kakao Corp., will reschedule its planned initial public offering (IPO) as it needs to realign its business scope upon remedial pressure on its outsized market presence.

According to multiple sources from the investment bank industry on Friday, Kakao Mobility informed local and foreign brokerages late Thursday that it is temporarily holding off its tender to select an IPO underwriter. The suspension comes after the company delayed tender deadline from September 10 to 17.

Kakao Mobility informed major local and foreign investment banks of the tentative postponement one day before tender deadline, said an industry official who asked to be unnamed.

“Many investment banks at this point thought it would be difficult to carry out the IPO, and Kakao Mobility agreed,” the official said.

Market insiders noted that the measures for symbiotic growth unveiled by its parent earlier this week affected the IPO schedule as they included Kakao Mobility business downsizing. Measures were announced as a preemptive move against possible government sanctions over its increasing market dominance that threaten community business and exploit on cab drivers.

Kakao announced that it will adjust its Kakao T taxi service as part of efforts to enhance social responsibility. It decided to completely fold its smart call up service and cut its monthly pro-membership fee of taxi drivers from 99,000 won to 39,000 won.

The company will also withdraw from businesses criticized for infringing on mom-and-pop stores such as flower, snack, and salad delivery services. It will also apply different commission rates to driver-hailing service depending on supply and demand instead of the 20 percent fixed rate.

The changes in Kakao Mobility business are expected to bring down its target valuation. Local analysts and investment bank industry had estimated corporate value at between 6 trillion won and 7 trillion won.

It is generally the case that valuations of platform operators are based on their revenue. A downsizing in Kakao Mobility business will reduce revenue source and the company and investment banks placing underwriting offers will have to go back to square one for valuation.

Another industry official said that the latest shared growth announcement has a big influence on revenue structure and that corporate valuation will have to be recalculated. The official expected bidding procedure to restart in October.

Kakao Mobility won’t likely call of IPO itself as it needs to pave the way for financial investors to recoup funds. So far, Texas Pacific Group, Carlyle Group, Korea Investment Partners, and ORIX Capital have joined as financial investors.

In February, Kakao Mobility received $200 million investment from Carlyle Group and valued the firm at 3.42 trillion won.

Meanwhile, Kakao Pay, financial service unit of Kakao, is also expected to face delay in its IPO. Financial investment industry projected the listing initially scheduled for October 14 to be pushed to end-October or November.

Shares of Kakao closed Friday 1.65 percent lower at 119,500 won.

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