Millie’s Library drops IPO due to tepid institutional demand

Millie’s Library [Provided by Maekyung Media Group]

Millie’s Library, South Korea’s subscription-based e-book service startup, on Tuesday canceled its plan to go public this year after its initial public offering (IPO) drew weak demand from institutional investors during a three-day book-building sessions that ended on Monday.

The company on Tuesday said in a regulatory filing that it has decided to withdraw its IPO plan, citing the poor demand. Most investors offered to buy Millie’s Library’s IPO shares at less than 20,000 won ($14.47) per share during the book-building sessions, with the final competition rate of below 100 to 1, according to the investment banking (IB) industry on Tuesday. The proposed price is much lower than the bottom end of its indicative IPO price range between 21,500 won and 25,000 won.

After confirming the poor demand for its IPO, the company is said to have offered to reduce the number of IPO shares including existing shares held by venture capitalists in hopes of pricing it at 20,000 won per share at the lowest, according to sources.

But institutional investors still considered 18,000 won per share was the right price for Mille’s Library IPO shares, which is much lower than what its existing investors hope to cash out. HB Investment, STIC Investments and NICE Investment Partners wanted to sell part of their holdings in Mille’s Library during the IPO.

Big investors like pension and mutual aid funds and asset management firms remained reluctant to buy its IPO shares amid growing concerns about the growth potential of platform companies like Mille’s Library in a high interest rate environment.

Car-sharing platform SoCar [Provided by Maekyung Media Group]

Car-sharing platform SoCar went public at 28,000 won per share far below its IPO price on the Kosdaq in August. The company has since lost its value to the level of 16,200 won. Early in May, the country’s home-grown app market One Store withdrew its IPO plan after checking weak market demand for its IPO shares.

Some investors have raised questions about the calculation of Millie‘s enterprise value, which was set by referring to the half-year net profit of listed webtoon companies (Kidari Studio, DNC Media, and MrBlue) that are gaining in popularity unlike e-book with letter-based content.

Some pointed out that the target sales and operating profit suggested by Millie’s Library are too rosy. The company forecast that its revenue for 2023 would more than double and operating profit would more than quadruple from this year’s estimates.

According to industry sources, Millie’s Library emphasized its low value compared to RIDI during a roadshow for institutional investors, but it was less convincing to them. Earlier this year, RIDI was recognized for its corporate value of 1.6 trillion won when it attracted the Government of Singapore Investment Corporation (GIC) and Korea Development Bank as new shareholders. But in the recent venture capital market, RIDI’s existing shares are traded based on an enterprise value of around 800 billion won due to the rate rises.

By Kang Woo-seok and Minu Kim