이 기사는 2020년 02월 20일 08:00 thebell 에 표출된 기사입니다.

WeWork’s failed attempt to list its shares last year is weighing on FastFive’s IPO plan.

FastFive, a Seoul-based office space startup often dubbed as the South Korean version of WeWork, is seeking to list on the Kosdaq, the Korean equivalent of Nasdaq, which allows loss-making growth companies to apply for IPOs as long as they meet certain requirements, sources close to the matter said. As the decision on the listing venue has been made, the company is accelerating preparations for its IPO.

Founded in 2015, FastFive is one of the country’s leading startups in the co-working office space sector, with more than 20 offices in Seoul’s CBD areas. It has a business model similar to that of WeWork, generating revenue by leasing long-term office space to rent it to others in the short term. Revenue of the company – currently at the growth stage – is growing fast, but its earnings trends remain volatile.

Its valuation estimates once rose to “trillions” of Korean won among analysts when the company first announced its IPO plan last summer. That was partly because of a wave of optimism over the sector, with WeWork, which at the time was aiming at listing its shares on the New York Stock Exchange, valued as high as at $47 billion in its funding round in January 2019.

But the real estate unicorn shelved an IPO plan last fall, with its $1.3 billion losses in the third quarter raising investor concerns about the company’s prospects. The fallout from the failed IPO reportedly forced SoftBank, the company’s largest outside shareholder, to write off about $3.5 billion from $4.4 billion of its investment in the company during the year.

Differentiating from WeWork

Market watchers point out FastFive needs to differentiate itself from WeWork in order to be successful in its attempt to list, which is expected to take place as early as this year. They say it needs to underline that WeWork’s failed IPO is more to do with its poor corporate governance than its business model.

Indeed, at the center of the WeWork saga was co-founder and former chief executive Adam Neumann, who was ousted by the board of directors last September. Newmann reportedly bought property that he then leased to WeWork. The company also paid him nearly $6 million to change its name to “The We Company,” a trademark that Newmann owned.

FastFive needs to step up efforts to improve its internal control and corporate governance practices, which also needs to be stressed during the IPO’s marketing. These criteria are among key factors for the company to get the green light from regulatory authorities as well.

FastFive’s revenue for 2018 almost tripled to 21 billion won ($17 million) year-on-year. The company also has seen an improvement in profitability during recent months: It posted a net loss in 2018 but began turning a net profit on a monthly basis last November. This could be seen as a progress on the company’s path to profitability, which contrasts with the case of WeWork.

“WeWork’s failed attempt at an IPO largely resulted from a moral hazard problem, which has no relation to FastFive’s business,” said a market insider. “FastFive continues to expand its operations and has shown signs of improvement in profitability, which can help attract public investors focusing on the growth potential in the company.”

(By reporter Jeon Kyung-jin)