IPOs on KOSPI log worst performance in past 5 years

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This year's initial public offerings (IPOs) made on Korea's main benchmark, the KOSPI, are expected to record the poorest performances in the past five years, due mainly to increased market volatility from soaring interest rates and unfavorable external conditions.

According to the securities industry, Wednesday, a total of five companies have so far made their debuts on the KOSPI this year, including Doosan Robotics and Nexteel. If considering companies currently in the process of public offerings, such as EcoPro Materials, Dong In Entech and DS Dansuk, the entire number of this year's listings would rise up to eight.

The number itself is not a significantly weaker achievement, compared to the annual number of IPOs in previous years. Given that the average number of listings has stood at 9.6 per year for the past 10 years, it can be seen as a relatively commendable performance, considering the volatile market conditions with nosediving asset prices amid frozen investor sentiment since last year.

However, the total amount of capital raised through IPOs is far behind that of previous years. So far this year, only 501.7 billion won ($385 million) has been raised. Even when combining the capital estimated to be raised during the public offerings of EcoPro Materials, Dong In Entech and DS Dansuk later this year, the accumulated amount of capital is still unlikely to reach 1 trillion won.

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There have been only two previous times in the past decade that the aggregated amount of capital raised during IPO processes within one year fell short of 1 trillion won — in 2013 when it marked 661.4 billion won and in 2018 with 916.6 billion won. In 2013, only three companies went public on the KOSPI, whereas in 2018, the main benchmark index showed a severe correction period due to the escalating U.S.-China trade dispute.

The common denominator in the two previous cases and this year lies in the absence of mega-sized deals that could siphon liquidity from the markets. As seen earlier this year, highly anticipated large market cap companies, such as Seoul Guarantee Insurance, unexpectedly withdrew their listing plans amid the continuance of high interest rates. EcoPro Materials, which had garnered high market expectations for its IPO, also failed to excite institutional investors during a book-building process conducted earlier this month, following a decline in stock prices of secondary battery-related companies.

Market experts suggest that while the status and performances of individual companies preparing for an IPO are important, ultimately more funds should come into the stock market to revive the slowed IPO market.

"In the end, the success of a company's IPO relies upon macroeconomic factors, such as a halt to interest rate hikes, slowdown of inflation and signs of an economic soft landing. Only when more funds come into the stock market, can IPOs garner enough capital through the listing process," Park Sang-hyun, an economist at Hi Investment & Securities, told The Korea Times, Wednesday.