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.
Coronavirus disrupts Korea's IPO market
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By Anna J. Park
Hotel Lotte, SK Broadband may delay listings amid recession fears
By Anna J. Park
Due to looming concerns about a global recession led by the COVID-19 pandemic, this year's initial public offering (IPO) market has been heavily disrupted. Many major companies scheduled to go public this year are reconsidering whether it is the right time to do so, given the ever-fluctuating stock market and negative economic outlook.
According to the Korea Exchange (KRX), no company has been newly listed on the benchmark KOSPI during the first three months of the year. Since the compilation of related statistics began in 1999, this is only the fourth time that no company has listed on the KOSPI during the first quarter of the year, following three previous cases in 2001, 2013 and 2014.
So far this year, eight companies went public on the secondary Kosdaq, but four of them have seen their stock prices already plunge by 30 percent to 40 percent. The IPO number itself is much lower than last year's 12 companies that went public during the same period. Against this backdrop, over six companies, including SCM Lifescience, NFC and LS EV Korea, have submitted withdrawals from their pre-scheduled IPOs.
“The main reasons why IPOs are canceled or delayed are that first, the stock market indices' range of fluctuations have increased a lot,” Park Jong-sun, an analyst at Eugene Investment & Securities, wrote in a recent analysis on this year's IPO market outlook.
“Secondly, investors' understanding of IPO-scheduled companies remains very low, as various offline presentations have been canceled due to the spread of the pandemic. Lastly, valuations aren't reflected appropriately as (IPO) book building processes aren't proceeding accordingly, with much lower participation by institutional investors,” he added.
Despite such concerns, SK Biopharmaceuticals, previously expected to complete all its IPO preparations by the first half of the year, is known to be going ahead as planned.
As the biopharmaceutical company is expected to easily raise more than one trillion won ($ 818 million) through its IPO, it has long been enjoying media attention as one of the major offering this year.
Officials at SK Biopharmaceuticals and NH Investment & Securities, the company's lead manager told local outlets that it plans to complete the IPO process by June this year as planned, although it said it is closely watching the market's moves.
The reason behind the unchanged plan is basically two-pronged.
First, the company has already completed a preliminary evaluation by the Korea Exchange (KRX) at the end of last year, which allows another six months to finish the whole IPO process, although this period can be extended upon request.
Second, the company's FDA-approved new drug Xcopri for treatment of epilepsy is expected to begin U.S. sales in the second half of the year, and the company probably hopes to proceed with the IPO with high hopes for the new drug's U.S. sales.
Kakao Bank is another major company that vowed to continue its IPO as planned amid the market uncertainty. The internet-based bank will list on the stock market as early as the end of this year or early next year. CEO Yoon Ho-young recently told reporters that the IPO schedule hasn't changed due to the pandemic.
The bank boasts a huge number of clients that stands at over 11 million, and the bank has successfully moved into the black in just two years since its launch. The bank official said that while the exact timing and schedule of the IPO had yet to be decided, it will proceed in a way that earns the best valuation of the firm.
Meanwhile, Hotel Lotte's much-anticipated listing doesn't look as if it will be realized this year, as the hotel and travel industry is being hit hard by the pandemic. The company has been pushing an IPO since 2015, but it has been delayed for several years.
The IPO of SK Broadband, an affiliate of SK Telecom, will also be delayed by about another year. SK Telecom CEO Park Jung-ho announced that the delay was due to COVID-19, when he spoke during the company's shareholders meeting at the end of February.
Korean game developer Krafton is also likely to delay its IPO due to an unsatisfying performance of its new game; and chemical company Taekwang Industrial has also put off its listing until sometime next year.
An unnamed market insider pointed out that the shrunken market situation could continue for the next few years, as evaluations normally consider companies' performance results over the previous two to three years.
He said that companies could delay the listing process further, as they try to avoid reflecting poor performances from this year due to the frozen economic condition.