Musinsa’s ‘$6.85 Billion Valuation’ Under Scrutiny, PER of 143 Times Deemed Unrealistic

Musinsa Faces Growing Skepticism Over Its Elevated Valuation
Top-line Expansion Continues, but Profitability Pressure Persists
PER of 143 Times Far Outstrips Industry Average by Tenfold

As Musinsa—often described as a heavyweight valued at $6.85 billion—moves toward its initial public offering (IPO), questions surrounding its valuation have resurfaced after Mirae Asset Securities, once considered the leading candidate for the underwriting mandate, voluntarily withdrew from the competition. Its valuation has nearly tripled in just two years, far exceeding global averages, fueling persistent concerns about overpricing. Based solely on expected price-to-earnings ratio (PER), Musinsa would require a multiple of 143 times its current earnings to reach a market capitalization of $6.85 billion. PER is typically the metric investment banks scrutinize most closely before undertaking an underwriting bid due to the inherent risk of inflated valuations.

Mirae Asset Reached the Shortlist but Withdrew from the PT

According to the investment banking (IB) sector on the 18th, Mirae Asset Securities did not participate in Musinsa’s underwriting presentation (PT) last month. Although CEO Kim Mi-seop was initially expected to lead the presentation in person in line with Musinsa’s targeted valuation of $6.85 billion, the plan was canceled at the last minute. Should Musinsa proceed smoothly with its listing, the IPO proceeds alone are expected to exceed $684.9 million. For major domestic securities firms, this is a blockbuster deal they would typically be unwilling to forgo. It is rare for a prominent firm already shortlisted as a qualified candidate to skip the PT altogether.

This has strengthened speculation within the IB industry that Mirae Asset found Musinsa’s valuation target excessively high. As of the 18th, 54 companies on the KOSPI have a market capitalization exceeding $6.85 billion. Should the market accept Musinsa’s valuation, the company would be ranked alongside HD Hyundai, whose stock surged after finalizing the merger between HD Hyundai Heavy Industries and HD Hyundai Mipo, and even surpass companies such as Hanwha Systems and HD Hyundai Marine Solution—major beneficiaries of this year’s “shipbuilding-defense-nuclear” thematic rally.

However, according to the unlisted trading platform Securities Plus, Musinsa’s estimated market capitalization as of the 18th stands at approximately $2.53 billion, with shares trading at around $13.01 per share. Despite falling well short of the $6.85 billion target, expectations for the higher valuation remain elevated within and around the company. Musinsa secured a valuation of approximately $2.40 billion during its Series C fundraising in 2023, even while posting an operating loss of roughly $4.66 million. Considering this history, the company argues that improved earnings power should warrant a higher valuation today. Indeed, Musinsa posted an operating profit of about $704.1 million last year, marking both a return to profitability and notable growth. It also recorded $403.4 million in operating profit and $254.8 million in net profit in the first half of this year, maintaining momentum.

Valuation Pressure Persists, Valued Twice as High as Coupang

While Musinsa’s scale has undeniably expanded, skepticism remains over whether its valuation can reasonably reach $6.85 billion. Some analysts note that Musinsa’s target valuation exceeds that of Coupang at the time of its IPO, even when Coupang was considered one of the most significant unicorn listings. According to LS Securities, Musinsa’s projected price-to-sales ratio (PSR) for this year stands at around 7 times—double the 3.5 times ratio recorded by Coupang when it debuted on the New York Stock Exchange (NYSE) in 2021. Although Coupang’s stock price soared more than 40% above its $35 listing price on its first trading day, it later declined sharply amid pressure to prove profitability and tightening global liquidity, at one point falling below $10.

The market is especially concerned about Musinsa’s cash flow. Inventory has increased, and financing costs are almost equivalent to operating profit. At a valuation of $6.85 billion based on last year’s earnings, Musinsa’s PER climbs to 143 times. In other words, achieving a $6.85 billion market cap requires a 143-times multiple on current performance. Given the platform business model’s susceptibility to margin fluctuations depending on marketing and investment activity, even using enterprise value-to-sales (EV/Sales) still places Musinsa toward the high end of industry valuations. Applying the valuation Musinsa received in 2023—approximately $2.40 billion—to its 2024 revenue of roughly $8.51 billion KRW (≈$8.51B KRW?)* yields an EV/Sales ratio of about 2.8 times, but substituting the $6.85 billion valuation raises the ratio to 8 times. This far exceeds the post-IPO EV/Sales ratios of major global peers such as Japan’s Zozotown (2.4 times), Germany’s Zalando (2.3 times), and Mytheresa (4.1 times).

Moreover, according to Musinsa’s semiannual report, its inventory assets rose from approximately $228.7 million at the end of last year to $291.2 million in the first half of this year—an increase of nearly $62.5 million. Rising inventory suggests delays in sales. Although the fashion industry traditionally sees peak demand in the fourth quarter, which could justify advance stockpiling, fashion platforms face rapid shifts in consumer trends, meaning inventory value typically declines over time. Inventory turnover also fell from 1.7 last year to 1.4 in the first half. This indicates that inventory cycled 1.7 times per year previously but only 1.4 times now.

Rising Debt and Falling Cash Holdings; Uncertain Global Expansion Prospects

Musinsa’s debt ratio is another concern. As part of its IPO preparations, the company issued corporate bonds to secure liquidity. On the 30th of last month, it raised approximately $20.5 million through a primary collateralized bond obligation (P-CBO). Including this issuance, Musinsa’s total assets as of the first half stood at around $15.26 billion, with total liabilities of approximately $13.11 billion. Its corporate bond balance has risen to about $68.5 million, pushing its debt ratio from roughly 609% to 620%. Lease liabilities are also worrisome: non-current lease liabilities stand at about $116.4 million, while current lease liabilities increased 17% from last year to approximately $27.5 million.

Subsidiaries also present financial burdens. The resale subsidiary Soldout (SLDT) posted operating losses of about $29.3 million in 2022 and $19.7 million in 2023. It also lags behind rival Kream, backed by Naver. SLDT recorded roughly $12.5 million in revenue last year, dwarfed by Kream’s approximately $116.4 million. Musinsa fully absorbed SLDT in March and plans to introduce paid commissions—previously free—for secondhand transactions beginning in September, but recovery remains uncertain. Another subsidiary, 29CM, has similarly failed to deliver tangible improvements, underscoring the challenge of strengthening profitability through core businesses.

Musinsa is accelerating its overseas expansion into markets such as Japan and China to enhance valuation appeal, but results remain uncertain. At its Global Partners Day held in June, the company pledged to generate approximately $2.05 billion in annual global gross merchandise value (GMV) by 2030. However, export volume in the first half accounted for just 0.57% of total transactions, only marginally higher than last year’s 0.34%. Musinsa Japan also posted an operating loss last year, signaling ongoing underperformance.

Discrepancies between internal and external valuation benchmarks are also fueling debate. According to corporate filings, Musinsa granted approximately 200,000 shares to employees in April at about $9.95 per share. Using the total number of outstanding shares—202 million—this implies a corporate valuation of roughly $2.05 billion. Yet the company is now offering the market a valuation nearly three times higher, widening the perceived gap in pricing.