By Anna J. Park
It has become more frequent these days to see tenbagger stocks ― shares in companies that pay off more than 10 times their initial purchase price ― both on markets here and abroad.
More such cases are witnessed on the U.S. stock markets, where daily price ceiling limits do not exist, than in Korea where a daily limit up (down) ― share price increase (decrease) ― of 30 percent is enforced.
However, local biopharmaceutical company Vaxcell Bio Therapeutics, a manufacturer of cancer immunotherapy drugs that was listed on the tech-heavy Kosdaq Sept. 22, has seen its stock price skyrocket closing at 202,500 won ($185), Friday. This is nearly a 10-fold jump from the 21,300 won close on the first day of its IPO.
The firm's stock was also the No. 1 in returns among newly listed companies on both the KOSPI and Kosdaq markets last year.
The company's listing was nothing like the current frenzy for IPOs. Its initial subscription level was set at 30,000 won, but immediately after the listing the price dropped to 27,000 won ― the starting price of an IPO can range between minus 10 to plus 10 percent of the subscription price ― and continued to fall to 21,300 won for a 21.11 percent loss in value on the first day of trading.
Investors' avoidance of the unpopular stock continued until mid-October. But the atmosphere around the firm's value completely changed as securities firms' research papers began to focus on positive Phase 2 trial results for a liver cancer treatment drug.
Vaxcell was the first company to achieve a tenbagger performance on the Korean stock market in just four months since the dot-com bubble in 2000. Even the infamous SillaJen ― once one of the largest market cap firms listed on the Kosdaq, whose stock trading has been halted ― took 11 months to rise to 10 times its IPO price.
But this is why investment banks are voicing concern that the current bull market atmosphere is way overheated.
"It's not sure yet whether or not the price's unexpected surge was due to a failed valuation calculation by underwriting firms during the IPO process. Still, it is hard to explain the 10-fold jump in a few months with only Phase 2 of clinical trials without relying on the power of excessive liquidity and speculative frenzy on the market," a trader pointed out, stressing caution in making investments.