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By Anna J. Park
Local branches of global investment banks (IB) operating in Korea have barely been seen in domestic initial public offering (IPO) undertakings during the first half of this year, owing to the lack of trillion-won-sized major public offering deals in the country.
According to the investment banking industry, major global investment bank branches operating in Korea ― namely, JP Morgan, Citigroup Global Markets, Goldman Sachs, Morgan Stanley and Credit Suisse, among others ― did not join the IPO proceedings of any local companies that went public during the first half as underwriters.
As for upcoming IPOs during the second half of this year, Credit Suisse (CS) has joined local securities firms in listing Doosan Robotics. The bank has been tapped as one of the main underwriters for the deal. Except for CS, however, other global IBs might end this year with empty hands in terms of IPO revenue.
Among companies that have already submitted a preliminary application to the Korea Exchange (KRX) to pursue an IPO during the second half, none included global IBs as joint leads in the book-building process. Specifically, Seoul Guarantee Insurance (SGI) and EcoPro Materials, two major IPO candidates for the second half, have all appointed local securities firms as their lead managers for the listing process.
This contrasts with their active performances as part of the main IPO underwriters of major deals in previous years. For instance, Morgan Stanley acted as a joint lead manager of the public offering of LG Energy Solution (LGES) last year, along with KB Securities, which set the record as the largest IPO deal in the Korean capital market. Bank of America, Citigroup Global Markets as well as Goldman Sachs also joined the deal as book runners.
Global IBs also took the main role, either as a joint lead manager or a book runner, in huge IPO deals of the past couple of years, including KakaoBank, Kakao Pay, SK ie technology (SKIET) and HD Hyundai Heavy Industries.
Market watchers say their lost ground in the country's recent IPO scene is primarily to do with a temporary disappearance of mega-sized IPO deals due to unfavorable market conditions. Since the correction period of global asset prices and stock markets in the second half of last year, assessed corporate values for companies that aim to go public have been cut as a consequence. This is on top of a retreating demand for their stocks.
Analysts also point out that a series of IPO procedural regulation changes in the country, such as a systemic change in the setting of opening prices and a cap on the daily upper limit of new listings, have created friction in the market that somehow temporarily deters mega-sized IPO deals.
"It seems the local IPO market at this point is at the juncture of a transition period," Oh Gwang-young, an analyst at Shinyoung Securities, told The Korea Times, Monday. "The IPO market is closely linked to both the overall market conditions as well as the financial authorities' policies, and now it seems both factors do not seem to be providing big incentives for corporations to go public at this point."
"Major IPO deals that foreign investors might be interested in are not likely to be around until the end of the second half, thus hampering global IBs' participation in the process. Yet, market ambiances can change in an instant, once investors figure that the atmosphere changes in a favorable direction. And that's when large-sized companies aiming to go public are expected to join their IPO initiating procedures, drawing in foreign investors as well as global IBs into the listing market again," the analyst added.
During the first half of this year, the total amount of capital raised through IPOs by 26 newly-listed companies stood at roughly $700 million, a 94 percent fall from the same period last year. With branches of global IBs losing grip in the local IPO market, Korea Investment topped the IPO revenue during the first six months, followed by Samsung Securities, Mirae Asset Securities and Hanwha Investment & Securities.
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