[IPO Spotlight] K-Auction, The Era of K-Art Is Coming

Seoul Auction and Art Auction Market Oligopoly
Expecting 21.5 Billion KRW Fundraising through IPO... Foundation for External Growth
Unprecedented Boom in Art Distribution Market Last Year

[Asia Economy Reporter Hyungsoo Park] K-Auction, which, along with Seoul Auction, dominates the domestic art auction market, is entering the KOSDAQ market. The funds raised through the initial public offering (IPO) will be used for purchasing artworks to activate auctions, securing intellectual property rights (IP), and expanding exhibition spaces. With the increasing consumption of K-content overseas, interest in domestic artworks is also expected to grow.

According to the Financial Supervisory Service's electronic disclosure system on the 6th, K-Auction will conduct a public offering subscription of a total of 1.6 million shares, including 1.28 million newly issued shares and 320,000 existing shares, for listing on the KOSDAQ market. The desired offering price range is 17,000 to 20,000 KRW per share, and K-Auction plans to raise at least 21.5 billion KRW.

K-Auction operates art auction business, art sales business, and art brokerage business. As of the first half of this year, K-Auction recorded a 42% market share in the domestic art auction market. Based on the art management platform ‘K-Office,’ it conducts systematic and stable auctions. K-Office, developed by K-Auction, is a comprehensive art management system that holds the largest distribution, appraisal, and authentication database among domestic art databases.

To conduct art auctions, it is necessary to secure at least 200 recognized artworks in the art market. Capabilities in logistics, storage, appraisal, promotion, exhibition, and accounting for the artworks are also required. This is why the entry barrier to the art auction market is high. K-Auction has maintained an oligopoly structure with Seoul Auction for several years. Through its subsidiaries, K-Auction supports promising emerging artists. It also pursues overseas major art sourcing and trading, as well as new art-related businesses.

Researcher Kyungha Yoo of DB Financial Investment analyzed, "Last year, the domestic art distribution market experienced an unprecedented boom," adding, "The total transaction amount increased by more than 140% compared to 2019, before the COVID-19 pandemic." The auction market transaction amount is estimated to have increased by more than 180% compared to 2019. This is the result of a combination of factors such as increased liquidity in the financial market, revenge consumption after COVID-19, strengthened real estate regulations, and alternative investment demand due to stock market instability. The entry of new collectors who accumulated wealth through startups or cryptocurrency investments also contributed to the boom in the distribution market.

As the domestic art distribution market grows, K-Auction plans to use the public offering funds to operate an exhibition hall similar in scale to its headquarters exhibition hall. By improving the efficiency of the art inflow/outflow and logistics system, the auction scale is expected to expand. It will purchase land to build an exhibition hall and storage facility next year and complete the building by 2024. It also plans to expand the existing storage facility through reinforcement construction.

About 10 billion KRW will be spent on purchasing artworks expected to appreciate in value and those currently undervalued compared to their intrinsic worth. By repeatedly acquiring and disposing of art assets that align with trends based on the public offering funds, a stable cash flow structure can be created.

Do Hyunsoon, CEO of K-Auction, accumulated over 20 years of experience in domestic and international finance and strategic consulting before officially joining K-Auction in 2011. Based on his experience working at the Bank of Korea, Lehman Brothers Hong Kong, Peregrine Securities Hong Kong, and McKinsey Seoul, he introduced digital innovation to K-Auction’s art auction and logistics. He built the integrated logistics and asset customer management system, K-Office, which increased trust among customers. Based on the vast K-Office database covering distribution, appraisal, and authentication, K-Auction established an information processing system covering ▲art logistics and appraisal ▲price estimation for art auctions and sales ▲art storage and information provision ▲and sales management related to artworks.

K-Auction’s K-Office, which has standardized over 120,000 artworks, provides real-time customer management functions along with online auction management. Based on K-Office, K-Auction holds over 40% market share in the domestic art auction market.

K-Auction recorded cumulative sales of 23.1 billion KRW and operating profit of 10.5 billion KRW through the third quarter of this year. It surpassed last year’s sales of 22.9 billion KRW and operating profit of 0.5 billion KRW. The boom in the art auction market led to increased auction volume and improved performance.

Shinyoung Securities, the lead underwriter, calculated K-Auction’s desired offering price based on a per-share valuation of 28,660 KRW and applied a discount rate of 30.22% to 40.68%. Seoul Auction and Tokyo Chuo Auction Holdings Ltd. were selected as comparable companies, and the per-share valuation was calculated using an average price-earnings ratio (PER) of 24 times.

Researcher Jongsun Park of Eugene Investment & Securities analyzed, "The desired offering price range corresponds to a PER of 15.1 to 17.8 times based on last year’s expected earnings per share of 1,125 KRW," adding, "This is a discounted level compared to the average PER of 24.0 times based on the annualized cumulative third-quarter results of Seoul Auction and Tokyo Chuo Auction."

He added, "We expect external growth through the public offering funds," and "the scale of art sales will also increase by purchasing high-priced domestic and international artworks."

This content was produced with the assistance of AI translation services.