Daily BriefsTMT/Internet

TMT: Freshworks, Kakao Corp, AXT Inc, Biel Crystal and more

In today’s briefing:

  • Freshworks IPO Valuation Analysis
  • Kakao’s De Facto Holding Company K Cube Holdings: Exactly What Are They Accused Of?
  • AXTI: Buying in Selling Pressure
  • Biel Crystal (伯恩光学) Pre-IPO – Industry Landscape & Peer Comparison –  Auto Is the Wildcard

Freshworks IPO Valuation Analysis

By Douglas Kim

Freshworks (FRSH US) announced its IPO price range of $28 to $32 per share and it is selling 28.5 million shares. At the high end of this price range, the company would raise $912 million and it would be valued at nearly $9.6 billion (assuming fully diluted shares outstanding of 300 million).

Our base case valuation of Freshworks is implied market cap of US$13.5 billion or US$45 per share, which is 41% higher than the high end of the IPO price range (US$32). Given the solid upside, we have a POSITIVE view of this IPO. 

Our valuation of Freshworks is based on an EV/S multiple of 22.6x using our estimated sales of $546 million in 2022. The EV/S multiple of 22.6x is based on 30% premium to the average multiple of the comps in 2022.

Kakao’s De Facto Holding Company K Cube Holdings: Exactly What Are They Accused Of?

By Sanghyun Park

There is a lot of confusion about exactly in which areas Kakao is under investigation by the Fair Trade Commission.

The Fair Trade Commission is investigating K Cube Holdings from two angles.

First: Non-disclosure of data on affiliates

The FTC requires every business group whose total assets exceed ₩10T to submit data on all affiliates to designate a cross-ownership restricted business group every year. In particular, the FTC requires detailed shareholder status data for companies (wholly or partially) owned by the family members of the head of a business group.

This purpose is clear. This is intended to regulate the exploitation of private interests by an owner family. That is, the FTC intends to prevent an unfair transfer of wealth.

However, the Fair Trade Commission argues that detailed data on K Cube Holdings, the de facto holding company of Kakao, have not been submitted for a long time.

The FTC is planning to intensively investigate whether K Cube Holdings has received profits from Kakao in an unfair way.

K Cube Holdings was established in January 2007 for the purpose of software development, and Kim Beom-soo (Kakao founder and chairman) owns 100% of the shares. K Cube Holdings currently owns a 10.59% stake in Kakao.

Kakao shareholding
Kim Beom-soo13.29%
K Cube Holdings10.57%
MAXIMO PTE (Tencent)6.29%
Source: KRX FIND

Most of K Cube Holdings’ seven employees (as of April of this year) are the family members of Chairman Kim. Chairman Kim’s younger brother, Kim Hwa-young, served as the CEO until the end of last year. Chairman Kim and his wife (Hyoung Mi-sun) are part-time directors. Chairman Kim’s son Kim Sang-bin and his daughter Kim Ye-bin also serve at the company.

Second: Violation of the Separation of Industrial & Financial Capital

The second is actually more fatal. The FTC is also investigating allegations that Kakao violated the ‘Regulation on Separation of Industrial and Financial Capital’.

K Cube Holdings changed its business registration type this year from management consulting to financial investment. As a result, K Cube Holdings, a financial company, came to govern the non-financial company, Kakao.

The Fair Trade Act stipulates that financial companies belonging to a cross-ownership restricted business group cannot exercise their voting rights over non-financial companies in accordance with the principle of Separation of Industrial and Financial Capital.

Violation of the Separation of Industrial and Financial Capital is way more serious than an unfair transfer of wealth and is subject to severe penalties.

AXTI: Buying in Selling Pressure

By Hamed Khorsand

  • AXT Inc. (AXTI) shares suffered from an aggressive seller that led to many investors concerned there was a company-specific event pushing the shares lower. There have been no news alerts in China related to AXTI’s operations and the Company remains on schedule to file its Shanghai listing documents in the next couple of months.


  • The current state of the end markets AXTI serves should result in AXTI experiencing revenue growth over the next couple of quarters. There have been no signs of slowing in data center connectivity and LED lighting and sensing.


  • The Company’s recent wins with new tier-one customers should result in fourth quarter revenue being higher than consensus estimates.


  • The selling pressure looks to have been initiated by a forced seller spiraling into other investors fearing for the worst even though the stock is now selling at a lower valuation than the last time the stock was at current prices.

Biel Crystal (伯恩光学) Pre-IPO – Industry Landscape & Peer Comparison –  Auto Is the Wildcard

By Zhen Zhou, Toh

Biel Crystal (0924581D HK) is looking to raise up to US$2bn in its upcoming Hong Kong IPO. 

Biel Crystal (BC) is the largest smart device enclosure and module solution provider in terms of shipment value in 2020 with a market share of 17.6%, according to Frost & Sullivan (F&S). BC’s products are used in end products such as smartphones, tablets, smart watches, AR, and VR glasses as well as automobiles.

In this note, we will look at the industry landscape and compare BC to other Apple suppliers.

We covered the IPO previously in:

Before it’s here, it’s on Smartkarma