NH Investment likely to be top beneficiary from SK Bioscience IPO

NH Investment & Securities CEO Chung Young-chae, left, and NongHyup Financial Group CEo Son Byung-hwan / Courtesy of NongHyup Financial Group

NH Investment expected to earn 5.5 billion won for IPO underwriter fee

By Anna J. Park

With vaccine manufacturer SK Bioscience's initial public offering (IPO) scheduled for next month, NH Investment & Securities is set to become the largest beneficiary of the public offering fee.

Given that the contract manufacturing organization (CMO) firm's expected share price band for the IPO ranges from 49,000 won ($44.3) to 65,000 won and a total of 22.95 million shares will be offered during the IPO, it is estimated that the SK affiliate could raise 1.49 trillion won ($1.35 billion) through the IPO, said analysts.

SK Bioscience will confirm its offering price after a two-day subscription process among institutional investors on March 4 and 5, and retail investors are allowed to subscribe to the IPO stock allotment on March 9 and 10. The company will make its debut on the KOSPI in March.

According to industry sources, SK Bioscience is set to pay out a total of one percent as IPO compensation to its underwriters, which is the sum of 0.8 percent for the basic IPO fee plus 0.2 percent performance fee. The 0.2 percent performance fee will be given out to brokerages that successfully complete the IPO process as incentives.

The one percent fee rule is generally applied to large companies' IPO cases whose market capitalization size exceeds 1 trillion won. Companies with less corporate value usually pay out around 3 percent of their raised money in the IPO process as an underwriter fee.

As one percent of the money raised through the process ― about 15 billion won ― will be spent on IPO fees to various brokerage firms engaged in the process, NH Investment, the main underwriter of SK Bioscience's IPO, is expected to earn about 5.5 billion won from its IPO fee as well as the performance incentive, the largest amount among local brokerages.

This means NH Investment could garner nearly the half of the money that it earned for the IPO underwriting fee last year through this IPO process. NH Investment is roughly estimated to have made an aggregate of over 12 billion won in 2020 for the IPO fees, including 2.5 billion won from leading SK Biopharmaceuticals' IPO as main underwriter last summer.

As the main underwriter of the firm's IPO, NH Investment also takes over 8.49 million shares, or 36.9 percent of the newly issued shares.

Market insiders say NH Investment's track record in bio firms' previous IPOs contributed to the deal.

“NH Investment has managed a lot of major deals in the bio sector. That led to SK Biopharmaceuticals' main underwriter role last year, and probably to this deal as well,” explained a market source familiar with the issue.

Other brokerage firms, Korea Investment and Mirae Asset Daewoo, are also partaking in SK Bioscience's IPO process, and they're expected to earn 3.4 billion won and 3.3 billion won, respectively, from the IPO fees.