By Anna J. Park
Following a successful initial public offering (IPO) of Kakao Games last week, the nation's top mobile messenger Kakao's financial affiliate Kakao Bank is on its way to going public sometime early next year.
Having witnessed a record-high subscription competition rate of 1,229:1 at Kakao Games' IPO, retail investors ― realizing they could not get as many stocks as they wish from a general subscription process ― are now moving toward several local over-the-counter (OTC) markets to purchase Kakao Bank's unlisted stocks.
As of Sept. 15, the mobile-based bank's stocks were traded at 126,000 won at Stock Plus ― one of several widely used OTC markets in Korea. The stock's price saw a 40-percent increase in less than a month. Given that the number of the bank's total stocks stands at about 365 million, the bank's market capitalization at the OTC markets is standing at around 46 trillion won ($39 billion).
The fact that this figure exceeds 44.4 trillion won, the aggregate market capitalization of the country's four major financial groups ― Woori Financial Group, Shinhan Financial Group, Hana Financial Group and KB Financial Group ― shows how much Kakao Bank's IPO plan is overheating.
Market analysts expect the internet-only bank's appropriate market cap size would be around 6 trillion won to 8 trillion won, only about 13 percent to 17 percent of the current market cap size at the OTC markets.
Such rising fever around IPO-expected stocks is nothing new. Kakao Games were traded at around 78,500 won on average at OTC markets until a day before its official listing at the KOSDAQ last week. The price was about three times higher than 24,000 won, the official IPO starting price; the game stock finished at 73,800 won at Monday's closing, ending a two-day's winning streak since the listing.
One market insider voiced a concern over such moves calling it a "speculative frenzy" surrounding the nation's IPO market amid excessive liquidity in the market.
"You need to be extremely careful when investing in unlisted stocks at over-the-counter markets. As fluctuations at the markets are more severe than listed markets, investors need to carefully calculate the total market capitalization of a company and trade stocks at appropriate prices," a market insider explained on condition of anonymity.
"We only could think of the purchase of Kakao Games at a more-than-three-times-higher price of the IPO starting price as an irrational behavior, which should be avoided."
So far this year, more than 150 trillion won was flowed into the IPO process. While only 45 stocks have been newly listed this year, less than the half of the number of IPO companies last year, the amount of money invested increased by more than 50 percent. Ninety trillion won was concentrated on only two IPOs: SK Biopharmaceuticals and Kakao Games.
Market analysts expect the "heavy inclination" of preferring large-cap growth stocks in the IPO market would continue for a while.
"Retail investors tend to have more interests in stocks that could draw a huge amount of money inflow," said Kim Dae-jun, market analyst at Korea Investment & Securities. "Stock deposit money has reduced to 47.4 trillion won from the previous 60.5 trillion won with the completion of Kakao Games' IPO, yet the amount is still much higher than 28.5 trillion won logged at the start of the year. The deposit money can flow into the market at any time. Amid the low-interests, retail investors' money is not likely to get out of the market soon."