Yello Mobile Inc., a South Korean mobile media company, won’t be able to go public this year as its aggressive expansion has impaired its income statement.
The company has increased its size by acquiring multiple promising startups, but its balance sheet took toll from amortization of goodwill worth 63 billion won ($55.2 million), according to an investment banking source on Tuesday.
A substantial increase in net losses last year would make it difficult for the company to gain initial public offering (IPO) approval from financial authorities this year, the source said, adding the company will instead pursue IPO next year after improving its business results this year.
Yello Mobile had been preparing to go public after picking Samsung Securities and Korea Investment & Securities as its IPO advisers in 2015.
Yello Mobile posted an operating loss of 28 billion won over sales of 442.7 billion won last year. The figures represent improvement of 41 percent each from a year ago. But net losses widened by 68 percent from 84.8 billion won to 142.4 billion won in the same period mainly due to goodwill amortization of 63 billion won out of 250 billion won in total last year. Goodwill is an intangible asset arising from premiums over the value of an acquired company. For example, when a company valued at 100 billion won is acquired for 130 billion won because of management rights, 30 billion won is recognized as goodwill on the accounting book of an acquiring company.
Market watchers say the delayed IPO is affected by large accounting firms whose corporate evaluation became more conservative after book-cooking at Daewoo Shipbuilding and Marine Engineering. The remaining 172 billion won goodwill is still weighing on Yello Mobile.
Sources say Yello Mobile is taking this issue seriously and focusing its resources on removing accounting uncertainties first. Yello Mobile founded in 2012 is a holding company of tech start-ups. It aims to create synergy from acquired start-ups involved in mobile service business. It currently has 85 subsidiaries including media content producer Pikicast Inc. and marketing company AdQUA Interactive Inc.
By Chun Kyung-woon and Song Gwang-sup
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