Kakao Mobility’s IPO hits snag as regulators target platform businesses Kakao's mobility arm unlikely to break even this year

Translated by Ryu Ho-joung 공개 2021-09-15 08:05:12

이 기사는 2021년 09월 15일 07:57 더벨 유료페이지에 표출된 기사입니다.

South Korea’s Kakao Mobility has hit a snag ahead of its planned initial public offering as it is likely to take more time for the company to break even due to heightened regulatory scrutiny.

Kakao Mobility originally aimed to achieve breakeven this year, with it plans to hike taxi-hailing and bike rental fees.

“Kakao Mobility’s revenue is expected to continue to grow at a rapid pace thanks to the growth in the taxi-hailing service market and new businesses, and we expect the unit to break even this year,” Yeo Min-soo, co-chief executive of Kakao Corp, the parent company of Kakao Mobility, said during a second-quarter earnings conference call.

Kakao Mobility, spun off from Kakao in 2017, operates the Kakao T app, which offers taxi-hailing, designated-driver and parking services. Its revenue grew from 16.7 billion won ($14.2 million) in 2017 to 280 billion won in 2020. The company has yet to turn profitable, although operating losses narrowed from over 20 billion won in 2018 and 2019 to 13 billion won in 2020.

Kakao Mobility in July announced plans to raise taxi-hailing fee to up to 5,000 won and a per-minute rental fee for bikes from 100 won to 150 won in a bid to improve profitability. However, the plans faced a strong backlash from the public and ended up being scrapped.

This has apparently affected the timeline for the company’s IPO, which was originally planned for next year. Kakao Mobility recently pushed back the deadline for brokerage firms to submit proposals for a role in its IPO from September 10 to September 17.

“We have delayed the deadline for a week just to be extra cautious,” an official at Kakao Mobility said.

Kakao Mobility has so far raised a large amount of money from external investors. An investor consortium led by TPG Capital invested 500 billion won in the company in 2017. Kakao Mobility also raised a combined more than 1 trillion won earlier this year from Carlyle Group, Google and South Korean conglomerates such as LG and GS. Kakao’s stake in the company has been diluted to some 50%.

Kakao Mobility is running out of time to prepare for an IPO as it promised its investors to go public by 2022. The investment by GS, which was the latest deal, valued the company at more than 4 trillion won.

However, it is likely that Kakao Mobility will have few options to address profitability as regulatory scrutiny has tightened. Korea Fair Trade Commission, the country’s competition authorities, recently launched an investigation of whether the company unfairly treated affiliated taxi drivers when allocating rides.

Kakao T holds an 80% share in the domestic taxi-hailing market, with about 28 million users at the end of 2020. (Reporting by Seul-gi Kim)
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