Venture-capital company stock prices rise on IPO hopes
Mounting interest in major IPOs this year to benefit venture capital firms' stocks
By Anna J. Park
The hugely successful initial public offering (IPO) of Korean e-commerce giant Coupang and hefty returns for key investor SoftBank have turned the market's attention to local venture capital firms that are expected to be the next in line to go public this year.
There has been a string of news reports recently detailing the specific public offering timelines of the most-anticipated IPOs of this year, including global online game developer Krafton, accommodation reservation app Yanolja and grocery delivery company Market Kurly. Investors have also been snapping up stocks of other promising venture capital companies.
Daesung Private Equity's stock price hit its daily-limit high during trading on Monday, surging 29.98 percent to reach a 52-week high of 3,035 won ($2.68). The stock closed up an additional 5.77 percent on Tuesday. The private equity firm's shares were stoked by news that Krafton's IPO will be completed within the first half of this year. Daesung Private Equity has been investing in the global online game developer since 2016.
AJ IB Investment, a venture capital and private equity firm based in Korea, also saw its shares hit the daily ceiling by soaring 29.98 percent during trading on Monday to a 52-week high of 5,680 won ($5.02). The stock closed up another 1.23 percent on Tuesday. The company is also known for its investments in Krafton and Yanolja.
In particular, AJ IB has been parking its cash in Yanolja since late 2017 and investments have surpassed 50 billion won. Yanolja's assessed market value has grown exponentially during the past few years, which means AJ IB stands to reap huge returns from the pre-IPO investments.
Shares of other venture capital firms have also been enjoying a bull run fueled by the IPO fever. Mirae Asset Venture Investment, which owns 2.4 percent of Market Kurly's shares, and SBI Investment, which invested around 10 billion won in Yanolja, also saw their stock prices increase on hopes of lucrative returns later this year.
DSC Investment's shares have also risen for three consecutive sessions as the firm's investments in Market Kurly are expected to bring handsome profits if the grocery-delivery unicorn succeeds in its recently announced IPO in the U.S. DSC Investment invested around 4 billion won in Market Kurly in 2015 during the seed funding stage of the startup.
Other venture capital firms like TS Investment and SV Investment have been enjoying bull runs for the past few consecutive trading sessions for their pre-IPO investments in Krafton and Market Kurly, respectively.
Despite intense market interest in the anticipated investment returns of venture capital and private equity firms following successful IPOs, experts advise retail investors to take a cautious approach backed by careful research into the stocks.
One of the key factors that retail investors need to check is the exact equity ownership of a venture capital company in a promising company. For instance, AJ IB Investment and TS Investment own less than 5 percent of Krafton, meaning that these firms will enjoy only limited returns following a successful IPO.
But many local venture capital companies continue to shine after recording all-time-high net profits last year and continue to receive favorable assessments not only in Korea but also in major stock markets abroad.
“As many local startups are beginning to yield tangible results, the venture capital industry has grown much stronger compared to a few years ago, drawing more money into the market,” a market insider pointed out.