Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Why Korea's IPO boom has turned into bust
gettyimagesbank
By Jun Ji-hye
14 of 17 new listings trade below offer prices amid chip-led market, tighter listing rules
Korea’s initial public offering (IPO) market is rapidly losing momentum despite a strong first-half rally in equities, as newly listed stocks have struggled to hold their offering prices, analysts said Monday.
The weakness reflects a market increasingly concentrated in heavyweight semiconductor stocks, while expectations of stricter listing rules have further dampened investor appetite for new offerings, they said.
Korea Exchange data show that the number of IPOs in Korea fell sharply in the first half, with just 17 companies listing on the markets — one on the KOSPI and 16 on the Kosdaq. This marks a significant decline from 38 companies a year earlier.
Of the 17 newly listed firms, 14 were trading below their IPO prices as of the Thursday close.
Peace Piece Studio has emerged as the worst performer among this year’s IPOs. The operator of fashion label Mardi Mercredi, once touted as a potential K-fashion unicorn, slumped more than 36 percent on its market debut on June 8. Its shares have since extended losses to more than 75 percent below the IPO price.
Autonomous driving software firm StradVision has also struggled. The stock opened more than 8 percent below its offering price on its June 30 debut before falling the daily limit of 40 percent, and has continued to decline over the following four sessions. It now trades more than 61 percent below its IPO price, with its market capitalization shrinking to about 240 billion won ($157 million) from around 640 billion won at listing.
Kbank, the only KOSPI-listed company among the 17 newly listed firms, has also come under pressure. Shares in the internet-only lender are trading more than 30 percent below the offering price despite investor expectations for long-term growth.
Analysts attributed the underperformance to investor concentration in large-cap artificial intelligence and semiconductor stocks. They noted that this has been draining liquidity from smaller Kosdaq listings and leaving many newly listed companies without enough institutional support to sustain post-debut gains.
“The domestic market has become increasingly concentrated in parts of the semiconductor value chain, leading investors to assign lower valuations to newly listed Kosdaq companies with relatively weaker earnings profiles,” said Oh Kwang-young, an analyst at Shinyoung Securities.
The government’s move to overhaul listing rules has also added to the chill in the IPO market, as proposed measures, including tighter curbs on dual listings and stricter delisting standards for penny stocks, have prompted companies to delay or reconsider listing plans.
“Companies have raised just 1.13 trillion won through IPOs this year, well below the historical average,” said Kang Young-hoon, an analyst at Samsung Securities. “The pipeline for large-cap listings has remained thin throughout the first half amid uncertainty surrounding proposed restrictions on dual listings.”
Still, market watchers expect IPO activity to regain momentum in the second half, forecasting that large-scale offerings will return after the government announces guidelines on dual listings.
Sono International has filed for a preliminary KOSPI listing review as it moves forward with its IPO plans. The hospitality arm of Sono Trinity Group is valued at about 3 trillion won.
Among major conglomerate affiliates, HD Hyundai Robotics and Hanwha Energy have selected lead managers and are closely monitoring regulatory changes before proceeding with their listing schedules.