More Korean unicorns race to tap US markets

Korean platform companies are increasingly setting sights on US listings as the domestic stock market loses momentum.

Viva Republica, the operator of financial app Toss, recently paused its initial public offering plans in Korea to explore a US listing instead.

“We are considering the US as our listing destination over Korea, but no specific plans or timeline have been set,” a Viva Republica official said Wednesday, noting that both markets remain options.

Viva Republica’s pivot highlights a wave of Korean companies eyeing New York listings. In June, Naver’s Webtoon Entertainment debuted on the tech-heavy Nasdaq with a $2.92 billion valuation. Coupang's New York Stock Exchange debut in 2021 set a precedent, underscoring what some view as the start of a potential “platform unicorn exodus” from Korea.

Yanolja, a travel booking platform, is reportedly targeting a US IPO next year, with Goldman Sachs and Morgan Stanley as underwriters, aiming for a $7 billion to $9 billion valuation. In February, it established Yanolja US LLC in Delaware, aligning with Coupang’s incorporation strategy. Other unicorns, like fashion platform Musinsa and content giant Kakao Entertainment, are also weighing New York IPOs.

A major factor driving the push for US listings is Korea’s undervaluation issue.

"In the US, losses aren’t a deal-breaker in listing evaluations, and future potential is key, whereas Korea prioritizes financial soundness,” said Ryou Hyo-sung, head of the Unicorn Business Institute. “But with unicorns often operating at losses, Korea’s market isn’t set up to support their scale,” Ryou added.

This focus on long-term growth is why most Korean companies eyeing US listings are tech-based. Coupang, for instance, listed in 2021 with a 3 trillion won ($2.18 billion) net loss — an obstacle for a Korean IPO but no barrier in the US, where it exceeded its $30 billion target and reached $88 billion on day one.

The ongoing “Korea Discount,” where stocks trade below their fundamental value, is another push factor.

Despite efforts from companies and government, Korean stocks remain stagnant, with volatility further eroding investor confidence. While the Kospi started at 2,607 this year, it sits around mid-2,500 points recently, after peaking at 2,891 in July and falling to 2,441 in August. Meanwhile, the Nasdaq has surged nearly 25 percent in 2024, reaching a record high of 18,712 this week.

Amid poor market performance, more firms have shelved IPO plans. So far this year, 43 have withdrawn, already surpassing the 2021 annual record of 40. K bank, an internet-only bank, scrapped its IPO attempt again this month due to weak demand.

Viva Republica, targeting a valuation between 10 trillion won and 20 trillion won, have faced skepticism about overvaluation, but a US listing could make this goal more feasible.

“With the US representing over half of global market cap, Korean companies can fetch valuations 10 times higher in the US than at home,” said Kim Dae-jong, a Sejong University professor.

Kim also noted that the dual-class share structure could further boost valuations for US-listed companies by giving certain shareholders enhanced voting power, allowing founders and major investors to retain control. Tech giants like Google and Facebook have leveraged this system in their IPOs.

Yet, some suggest that the possibility for Korean companies to actually make it into the US market is shallow.

“Coupang and Webtoon Entertainment were essentially US companies. Coupang’s founder was American, its headquarter was based in the US, and all investments came from the US. Webtoon Entertainment also restructured into a US firm before listing,” Ryou said. For a successful IPO in the US, coherence with the US market is critical, he noted.

Many companies have shown interest in a US stock debut in recent years, but most have yet to follow through. Yanolja initially targeted a launch in the second half of this year but appears to have postponed, while fresh food platform Kurly scrapped its US listing plans.

Even after debuting, challenges persist. Coupang’s share price has declined by nearly 50 percent since its listing, while Webtoon Entertainment’s, initially priced at $25 in June, now hovers around $10.

“An IPO is a means, not an end. What matters is performance after listing, and Korean firms will face the tough task of building presence and competing in the US,” Ryou said. “The US market may be open to foreign companies, but the scrutiny is rigorous.”