This article was published on Dec. 18, 2024, at 4:37 p.m. on the Chosun Biz Money Move (MM) site.
Venture capital (VC) firm TS Investment is pushing to sell its equity in the coworking space operator Fast Five. Following a failed initial public offering (IPO) in 2020, three years after its investment, the recovery path has been blocked, and there is still a belief that entering the stock market is distant. Additionally, the M&A fund that financed the investment in Fast Five has reached the liquidation point.
According to the VC industry on the 18th, TS Investment has recently confirmed its policy to sell its equity in Fast Five. In line with Fast Five's plans to attract pre-IPO (pre-listing investment) funding early next year, it has planned to sell all of its 8.3% equity held under the 'TS 2015-9 Growth Strategy M&A Investment Fund.'
Fast Five is considered TS Investment's painful spot. After the coworking office market formed in South Korea in 2015 and quickly expanded, TS Investment invested 5.5 billion won in Fast Five, which was the market leader in terms of the number of locations. However, it could not recover the investment before the fund's maturity.
Earlier in 2020, TS Investment attempted to recover its investment once, as Fast Five pushed for a listing on the KOSDAQ. However, it fell short of passing the listing examination threshold set by the Korea Exchange. Although sales have steadily increased, the ongoing operating losses impeded recovery.
Since early 2020, TS Investment has held shares in Fast Five as common stock. This is because it converted its redeemable convertible preferred shares (RCPS) into common stock before applying for preliminary listing review. It lost all the advantages of RCPS, such as conversion price adjustments and redemption rights.
Earlier, there were observations in the market that TS Investment would seek recovery again after Fast Five's listing. This is due to TS Investment's general meeting held at the end of October, where it postponed the liquidation deadline originally set for this year to October next year.
TS Investment seems to believe that the likelihood of Fast Five listing next year is not high. Concerns over a real estate asset crisis have increased following the bankruptcy of U.S. coworking firm WeWork, and Fast Five continues to suffer operating losses. Fast Five reported a deficit of 5 billion won last year.
Another burden is that Fast Five's subsidiary Day One Company is seeking to go public. Day One Company is an online education content subsidiary of Fast Five and is currently undergoing the listing process on the KOSDAQ. It previously aimed for a listing within the year but postponed it due to a downturn in the public offering market.
Meanwhile, there are projections that TS Investment could make some profit from the sale of its stock. This stems from a 2017 equity investment made when the company was valued at about 40 billion won. Even when Fast Five issued 5 billion won of convertible bonds in 2020, the company was assessed at a valuation of 330 billion won. However, it is expected that such a valuation will be hard to achieve during next year's pre-IPO.
A source in the VC industry noted, 'The value of coworking space operators has decreased due to the bankruptcy of WeWork, but domestic coworking spaces are continuing relatively solid growth,' adding, 'While it may not meet expectations for returns, the sale of Fast Five's equity itself is unlikely to be difficult.'