Musinsa kicks off Kospi listing process, seen as shot in the arm for sluggish IPO market

Online fashion platform Musinsa has formally launched the process of listing on the Kospi. With the initial public offering market subdued this year due to a lack of major listings, attention is turning to whether Musinsa — whose valuation is being discussed in the trillions of won — can inject fresh momentum into the market.

Korea Exchange said Monday it had received Musinsa's preliminary review application for a Kospi listing.

Founded in June 2012, Musinsa operates an online clothing sales and mail-order business. As of the application date, Chairman Jo Man-ho and 26 other shareholders collectively hold a 54.2 percent stake.

Korea Investment & Securities and Citigroup Global Markets Securities are serving as lead underwriters, with KB Securities as a co-underwriter and JPMorgan as an overseas co-underwriter.

The total shares scheduled for listing stand at 227.83 million, with 26.6 million shares set for public offering. Industry watchers expect the company to complete its public offering before year-end and list in early next year. The market values Musinsa at between 7 trillion and 10 trillion won ($7.47 billion).

"The market has been citing a range of 8 trillion to 10 trillion won, but recent over-the-counter transactions in existing shares have been at around the 4.2 trillion won level, while the underwriter selection process saw figures of 7 trillion to 9 trillion won discussed," said Jo Gyeong-jin, a researcher at IBK Securities.

Musinsa's top-line growth has continued. Sales on a consolidated basis for the first half of this year reached 821.7 billion won, up 22.6 percent from the same period last year — a record for any half-year period. Operating profit, however, fell 11.2 percent to 52.3 billion won.

The profit decline is attributed to rising raw-material and labor costs, higher logistics and commission expenses tied to increased transaction volumes, and upfront investment in overseas expansion into China, Japan and other markets.

Analysts said the success of Musinsa's IPO will hinge on its ability to improve profitability going forward.

"Top-line growth remains solid, but cost pressures are rising at the same time as the company expands overseas and into brick-and-mortar retail," said Oh Rin-a, a researcher at LS Securities. "In the IPO process ahead, a key evaluation criterion will be how stably the company can defend its profitability while sustaining sales growth in the 20 percent range."

Musinsa's listing push comes as the IPO market has contracted sharply. From January through August this year, there were 28 IPOs excluding blank-check companies, down 48 percent from 54 in the same period last year. On the Kospi in particular, Kbank — which listed in March — was effectively the only entrant, and no other company could be called a marquee listing.

Post-listing share performance has also been weak. According to Eugene Investment & Securities, the six stocks newly listed on the Kosdaq last month posted an average return of 9 percent from their offering price to their opening price — the lowest of any month this year.

Based on closing prices at the end of August, the average decline from offering prices was 23.6 percent, with five of the six stocks — all except Ingenia Therapeutics — trading below their offering prices. The average institutional book-building competition ratio of 372-to-1 and the average retail subscription competition ratio of 275-to-1 last month were also the lowest for any August since Eugene Investment & Securities began tracking the data in 2017.

From this month onward, however, the IPO market is expected to gradually recover. Eugene Investment & Securities projected nine to 11 IPOs this month, above the historical average of six for September based on data going back to 1999. Estimated proceeds from public offerings are seen in the range of 400 billion to 500 billion won, with estimated market capitalization of 2.1 trillion to 2.7 trillion won.

Market participants are hoping that a September rebound, followed by a successful debut from a large offering like Musinsa, would restore investor sentiment across the broader IPO market.

Beyond Musinsa, Sono International — another company cited as a trillion-won-class listing candidate for the second half — filed its preliminary review application with Korea Exchange in June. Sono International, with Mirae Asset and Daishin Securities as lead underwriters, is targeting a valuation of 3 trillion won.