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'Star-studded' IPO market heats up amid high liquidity


A sign at a Seoul branch of Korea Investment and Securities says at least 35-minute wait time is expected before being tended to due to a spike in the number of customers on the last day of request filings needed for subscription to purchase shares of SK Biopharmaceuticals ahead of the firm's initial public offering, June 24. Korea Times file
A sign at a Seoul branch of Korea Investment and Securities says at least 35-minute wait time is expected before being tended to due to a spike in the number of customers on the last day of request filings needed for subscription to purchase shares of SK Biopharmaceuticals ahead of the firm's initial public offering, June 24. Korea Times file

By Lee Kyung-min

South Korea's initial public offering (IPO) market is expected to continue strong momentum in the latter half driven by a number of top-rated firms lining up and backed further by pent-up investor demand amid a liquidity overflow, industry watchers said Sunday.

The government's continued and consistent push to tighten the property market against speculation, they said, has substantially diverted investors' interest to the lesser-controlled equity market where liquidity has spiked over the past weeks ― widely seen as an inevitable result given cheaper financing enabled by the record-low interest rate amid the virus-triggered economic crisis.

The much-appreciated vibrancy in the financial market is in part driven by some firms with huge growth potential. Yet, discretion is required, they warn, to make prudent choices and to avoid jumping on the investment bandwagon without fully understanding the consequences of their choices.

Data from the Korea Exchange (KRX), the country's main bourse operator, showed the local IPO market raised some 36 trillion won ($29 billion) in capital from private investors for between June 22 and 26.

About 85 percent, or 30.98 trillion won, came between June 23 and 24 after investors seeking pre-subscription for ordinary shares of SK Biopharmaceuticals, a drug research and development subsidiary of SK Group. The SK affiliate raised 30.5 trillion.

More than 1.26 billion shares were sought for subscription while only about 3.91 million shares were offered, raising the odds of winning a share to one in every 323.

The IPO market thereafter raised 4.7 trillion won in the following two days, some 1.9 trillion won by Shindo Eng Lab, a flat-panel display equipment manufacturer and over 2.7 trillion won by WITHUS Pharmaceuticals. The rapid capital inflow was fueled by expectation that the share price would soar, over double the initial price in the most optimistic scenario.

Data from the KRX and IR KUDOS, an investor relations (IR) consultancy, showed the increase rate of shares of 12 companies listed via the IPO in the first six months of 2020 averaged 52.4 percent as of June 26.

Shares of Leading Edge Technology (LET), an organic light-emitting diode (OLED) equipment manufacturer, shot up to 23,000 won, June 26, jumping more than 2.6 times the initial offered price of 7,800 won.

Other display equipment manufacturers, biopharmaceutical firms, clinical trial service providers and marketing agencies saw their shares soar between a rate of 50 percent and 144 percent.

In theory, nearly double in profit can be derived in the first day of trade from holding shares of firms that underwent the IPO, as they can be priced at up to 200 percent of the offered price at the beginning of the first trading day, according to some analysts.

"Given the stock price can report up to a gain or loss of 30 percent of the beginning price, up to 170 percent profit in a single day is possible," one analyst said.

Further advancing the rosy outlook in the months to come is planned IPOs of firms much-touted for their growth potential including Big Hit Entertainment, the agency representing Korean pop sensation BTS, Kakao Page, a content creator subsidiary of Kakao Corp. and Kakao Games, its game developer subsidiary.

Korea Financial Investment Association (KOFIA) data showed investor deposits stood at 46.3 trillion won, June 25, up about 70 percent from 27.3 percent from a year earlier, meaning the funds readily available for equity investment has soared over the past year.



A sign at a Seoul branch of Korea Investment and Securities says at least 35-minute wait time is expected before being tended to due to a spike in the number of customers on the last day of request filings needed for subscription to purchase shares of SK Biopharmaceuticals ahead of the firm's initial public offering, June 24. Korea Times file
A sign at a Seoul branch of Korea Investment and Securities says at least 35-minute wait time is expected before being tended to due to a spike in the number of customers on the last day of request filings needed for subscription to purchase shares of SK Biopharmaceuticals ahead of the firm's initial public offering, June 24. Korea Times file

By Lee Kyung-min

South Korea's initial public offering (IPO) market is expected to continue strong momentum in the latter half driven by a number of top-rated firms lining up and backed further by pent-up investor demand amid a liquidity overflow, industry watchers said Sunday.

The government's continued and consistent push to tighten the property market against speculation, they said, has substantially diverted investors' interest to the lesser-controlled equity market where liquidity has spiked over the past weeks ― widely seen as an inevitable result given cheaper financing enabled by the record-low interest rate amid the virus-triggered economic crisis.

The much-appreciated vibrancy in the financial market is in part driven by some firms with huge growth potential. Yet, discretion is required, they warn, to make prudent choices and to avoid jumping on the investment bandwagon without fully understanding the consequences of their choices.

Data from the Korea Exchange (KRX), the country's main bourse operator, showed the local IPO market raised some 36 trillion won ($29 billion) in capital from private investors for between June 22 and 26.

About 85 percent, or 30.98 trillion won, came between June 23 and 24 after investors seeking pre-subscription for ordinary shares of SK Biopharmaceuticals, a drug research and development subsidiary of SK Group. The SK affiliate raised 30.5 trillion.

More than 1.26 billion shares were sought for subscription while only about 3.91 million shares were offered, raising the odds of winning a share to one in every 323.

The IPO market thereafter raised 4.7 trillion won in the following two days, some 1.9 trillion won by Shindo Eng Lab, a flat-panel display equipment manufacturer and over 2.7 trillion won by WITHUS Pharmaceuticals. The rapid capital inflow was fueled by expectation that the share price would soar, over double the initial price in the most optimistic scenario.

Data from the KRX and IR KUDOS, an investor relations (IR) consultancy, showed the increase rate of shares of 12 companies listed via the IPO in the first six months of 2020 averaged 52.4 percent as of June 26.

Shares of Leading Edge Technology (LET), an organic light-emitting diode (OLED) equipment manufacturer, shot up to 23,000 won, June 26, jumping more than 2.6 times the initial offered price of 7,800 won.

Other display equipment manufacturers, biopharmaceutical firms, clinical trial service providers and marketing agencies saw their shares soar between a rate of 50 percent and 144 percent.

In theory, nearly double in profit can be derived in the first day of trade from holding shares of firms that underwent the IPO, as they can be priced at up to 200 percent of the offered price at the beginning of the first trading day, according to some analysts.

"Given the stock price can report up to a gain or loss of 30 percent of the beginning price, up to 170 percent profit in a single day is possible," one analyst said.

Further advancing the rosy outlook in the months to come is planned IPOs of firms much-touted for their growth potential including Big Hit Entertainment, the agency representing Korean pop sensation BTS, Kakao Page, a content creator subsidiary of Kakao Corp. and Kakao Games, its game developer subsidiary.

Korea Financial Investment Association (KOFIA) data showed investor deposits stood at 46.3 trillion won, June 25, up about 70 percent from 27.3 percent from a year earlier, meaning the funds readily available for equity investment has soared over the past year.


Lee Kyung-min lkm@koreatimes.co.kr

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