South Korean digital lender K Bank has been talking about an IPO for years, literally. Since 2022, the company has twice aborted plans to go public. In early November, it formally filed for a third time, aiming to go public in the first half of 2026 on the Korea Stock Exchange (KOSPI). Both the company and investors are hoping this third time is the charm.
In some ways, K Bank is stuck between a rock and a hard place. On the one hand, it is bound by a conditional rights offering from May 2021 that requires an IPO by July 2026. Investors, including Bain Capital and MBK Partners, injected 725 billion won into the South Korean digital lender at that time under the condition that if the IPO does not happen by July 2026, they can exercise their “drag-along rights” to sell their shares as well as those of top K Bank shareholder BC Card to recover their investment.
While BC Card secured a “call option” back in 2021, which gives it the right to buy back the shares of the other K Bank investors first, doing so would be expensive. BC Card would probably have to pay 1 trillion won (almost 63% of its own capital) to cover the investors’ initial 725 billion won plus an 8% promised internal rate of return.
Because of that promised 8% annual return, K Bank needs to achieve an IPO valuation of 4-5 trillion won, which is ambitious given its financials. K Bank posted a record quarterly profit of 68.2 billion won in the second quarter, but that figure fell to 19.2 billion won in the third quarter, down 48% year-on-year. Net profit in the first nine months of the year also dropped by 15.5% year-on-year to 103.4 billion won.
However, K Bank has performed well overall in recent years. Its 2024 net profit of 128.1 billion won was nearly 10 times as large as its 2023 profit of 12.8 billion won. It also had 12.74 million customers by the end of 2024.
The Asia Business Daily noted that K-Bank’s target price-to-book ratio (PBR) for its desired IPO price is 2.5 times, well above the Kakao Bank PBR of 1.6 times. To reach its target IPO valuation of 4 trillion to 5 trillion won, “K Bank must prove its platform value exceeds that of Kakao Bank,” the newspaper said. “However, it remains uncertain whether the market will view K Bank as a platform company.”
It is true that Kakao Bank achieved a whopping 18.5 trillion won IPO valuation when it listed on the KOSPI in November 2021, but that was at the height of a tech startup bubble that rapidly deflated after the company went public. Kakao Bank’s stock has lost almost 70% of its value since the IPO.
Meanwhile, regulators are probing K Bank’s close ties with leading South Korean cryptocurrency exchange Upbit. K Banks has had a real-name account partnership with Upbit since 2020.
The financial authorities plan to closely review whether K Bank has thoroughly detailed investment risk factors, including its concentration of funds from Upbit, in the securities registration statement. Regulators are evaluating the possibility of a temporary liquidity issue at K Bank if the Upbit partnership were to end and what the bank’s contingency plan would be.
Auguring well for K Bank is that it has significantly reduced its Upbit exposure in recent years. The partnership began in June 2020, and by 2021 K Bank was reliant on the cryptocurrency exchange for about half of its deposits. However, as of the second quarter this year, of Kbank’s total deposit balance of 26.8 trillion won, about 4.4 trillion won (16.42%) are Upbit escrow funds, compared to 50% in 2021.
