Indefinite delay in Kakao Mobility IPO concerns TPG, Carlyle

Indefinite delay in Kakao Mobility IPO concerns TPG, Carlyle

A taxi that can be hailed by Kakao Mobility’s Kakao T app is on the road in Seoul, Tuesday. Yonhap

By Park Jae-hyuk

Kakao Mobility has indefinitely delayed the selection of an underwriter for its listing on the benchmark KOSPI market next year, fueling expectations that TPG, Carlyle and other global investors may not be able to earn as much as they wanted from their investments in the Korean firm.

The designated driver and taxi hailing services provider informed securities firms of its decision late Thursday, a week after it abruptly postponed the deadline for bidding to Sept. 17 from Sept. 10, citing its willingness to be more prudent about its initial public offering (IPO).

“It has not been decided yet when we will resume the selection,” a Kakao Mobility spokeswoman said Friday. “We decline to disclose the reason why we postponed the procedure again.”

The continuous delay in Kakao Mobility’s IPO process has been attributed to the government’s intensifying regulations on online platform operators, which eventually prompted Kakao Chairman Kim Beom-su to announce Tuesday that Kakao would downsize its overall businesses.

Kim said that Kakao Mobility would terminate its flower and dessert delivery services, as well as cancelling the “smart call” function for its taxi hailing service, which aroused public criticism that the system only forced customers to pay more fees. In addition, Kakao Mobility decided to cut the commission fee for its designated driver service by 20 percent, according to the chairman.

The plans were seen as drastic enough to lower Kakao Mobility’s earnings outlook and estimated valuation.

Hanwha Investment & Securities analyst Kim So-hye lowered Kakao Mobility’s estimated valuation to 4.1 trillion won ($4.3 billion), Thursday from 5.2 trillion won earlier in August. The estimated valuation of Kakao’s stake in Kakao Mobility consequently dropped to 2.5 trillion won from 3.2 trillion won.

“It was regrettable that regulations have put the brakes on the expansion of Kakao Pay and Kakao Mobility, both of which are awaiting IPOs,” the analyst said in a report.

Korea Investment & Securities analyst Jung Ho-yoon also cut Kakao Mobility’s estimated valuation by 30 percent to 3.3 trillion won.

Despite these unfavorable factors, Kakao Mobility has no choice but to continue trying to go public, in order to keep promises made to its financial investors, including TPG, Carlyle, Korea Investment Partners and ORIX Capital, which were looking to divest after the IPO.

In contrast to strategic investors focusing more on synergy and integration capabilities, financial investors tend to bet on unlisted companies to make short-term profits after their IPOs. Kakao Mobility has Google, LG and GS as strategic investors.

A TPG-led consortium invested $116.8 million in Kakao Mobility in June, following its previous investment of 500 billion won in the company in 2017. The National Pension Service is said to have invested $100 million in Kakao Mobility in June as a member of the consortium.

Carlyle, which invested 220 billion won in Kakao Mobility in February, also made an additional investment of $8.2 million in June. When the U.S. private equity firm became one of Kakao Mobility’s major shareholders, it estimated the Korean firm’s valuation at 3.42 trillion won.

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