Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
KB, Morgan Stanley viewed as top beneficiaries from LGES IPO
KB Securities headquarters in Seoul, left, and the logo of Morgan Stanley / Courtesy of each company
By Anna J. Park
By Anna J. Park
As the local capital market is getting hyped up surrounding LG Energy Solution's impending initial public offering (IPO) ― which will be the country's all-time biggest IPO in terms of a company's initial market value ― now the attention is focused on which brokerage house will reap the most profit from handling the mega IPO, worth 70 trillion won ($59 billion).
As the LG Group battery affiliate was hoping to raise 12 trillion won through the scheduled IPO, local securities firms and global investment banks have been drooling over the prospects of taking the position of lead manager for the company's IPO, because of its accompanying massive underwriting fee.
Early this year, KB Securities and Morgan Stanley were jointly tapped to lead the process as co-lead underwriters, to the dismay of other major securities firms, including traditional IPO powerhouses NH Investment and Korea Investment, which couldn't find a spot for themselves in the IPO.
On top of the two co-lead underwriters, the underwriting process will also incorporate nine other brokerage companies, both local and global ― including three global firms, Goldman Sachs, Merrill Lynch and Citi Group Global Markets, as well as six more local firms, Daishin, Shinhan, Mirae Asset, Shinyoung, Hana and Hi Investment.
KB Securities is expected to produce the largest windfall from the IPO underwriting fee, as the brokerage firm covers 9.35 million of the entire 42.5 million shares being newly offered through the IPO. This amounts to nearly 22 percent of the total shares being newly offered, and is the largest portion to be held by a brokerage among the 11 participating brokerage companies in the process.
It is expected that the brokerage arm of KB Financial Group will reap roughly 20 billion won from the underwriting fee alone.
Morgan Stanley, which shares the joint lead underwriter role with KB Securities, is handling 8.07 million shares, which is about 18 percent of the secondary battery company's new stock offerings. It is expected to earn some 17 billion won.
Other global investment banks ― Goldman Sachs, Merrill Lynch and Citi Group Global Markets ― each underwrite 4.6 million shares of the newly listed firm, accounting for about 11 percent of the newly offered price. The global investment banks are expected to reap some 10 billion won from the work.
Daishin Securities and Shinhan Financial Investment also cover the same amount of stocks of 4.6 million shares each, while the remaining four local brokerage houses ― Mirae Asset, Shinyoung, Hana and Hi ― handle only 425,000 shares.
As more than 50 percent of the new shares will be sold to foreign institutional investors through the global investment banks, the total underwriting fees earned by the four global investment banking houses will be bigger than the aggregate amount by the seven local brokerage firms.
Yet it is undeniable that KB Securities will remain the top beneficiary of the mega IPO deal, underwriting the largest portion of LGES' newly offered shares.
The company explains that the feat is attributed to the fact that the firm's long-term development strategies have paid off. Since KB Securities increased its size through the acquisition of Hyundai Securities in 2016, the brokerage firm has strategically focused on strengthening its equity capital market (ECM) department, while buffing up the organization's capabilities.
“We view the recent big-name IPOs by the firm as proving the company's improved track record in the industry,” an official from KB Securities said.