Large-size IPOs fail to attract investors

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By Park Jae-hyuk

The continued horizontal price movement in the local stock market is dampening initial public offering (IPO) fever and prompting a growing number of companies to withdraw their plans to go public.

According to the Korea Exchange (KRX), Sunday, six companies cancelled their IPO plans over the past month. The number is considered to be quite large, given that since early 2021 two companies a month, on average, scrapped plans to go public.

In particular, a series of withdrawals of the listing of Simone Accessory Collection, SM Line and Netmarble Neo on the benchmark KOSPI market over the past two weeks came as a surprise to many people, because each of their valuations is estimated to reach up to 2 trillion won ($1.7 billion).

Simone cancelled plans to go public on Oct. 21, as the handbag maker failed to attract institutional investors. Industry sources mainly attributed the cancellation to Simone's second-largest shareholder Blackstone, which refused to accept a proposal from institutional investors to lower the IPO price.

SM Line dropped its IPO plan last Wednesday, saying that it was not evaluated properly during the demand forecasting session earlier this month. Most institutional investors reportedly offered prices lower than the shipper's target price range.

Netmarble Neo informed the KRX last Thursday of its intention to withdraw its preliminary application for an IPO, which was submitted in June. The Netmarble subsidiary had awaited the result over the past four months, but it eventually scrapped its plan, citing the lackluster market as one of the reasons.

Analysts said the recent market correction led institutional investors to be cautious about investing in companies, due to concerns that the IPOs will enable their major shareholders to sell their stocks in bulk.

“As the market has become volatile during the second half of this year, more companies are showing sharp declines in their stock prices after their listing,” SK Securities analyst Na Seung-doo said. “Investors should take into account negative factors.”