Will IPO market lose steam?

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By Lee Kyung-min

A growing number of investors are expected to adjust their expectations of immediate windfall gains from the initial public offerings (IPOs), as tempered by returns on the day of IPO in the fourth quarter of 2021 hitting the lowest level in a year despite the largest number of firms listing on the benchmark KOSPI and junior Kosdaq during that period.

Market watchers say the local IPO market could lose momentum compared to the explosive growth momentum over the past two years, due to investor sentiment dampened by tightened monetary policies steering away from the cheap liquidity supplied during the COVID-19 pandemic.

Of the top 30 firms with the highest public subscription rates measured by institutional investors' book building, only 12 were listed during the October-December period.

Their combined rate of return on the day of the market debut stood at only 29 percent, which was the lowest in a year. In contrast, the figure was 66 percent in the first quarter of last year, followed by 46 percent in the second quarter and 49 percent in the third quarter.

At the center of attention is whether LG Energy Solutions stockholders will enjoy handsome returns when the company goes public on Jan. 27, following book building and public subscription from Jan. 18 to 21.

Its desired public offering price ranges from 257,000 won ($213) to 300,000 won, with the publicly offered amount expected to hover between 10.9 trillion won and 12.75 trillion won.

The energy subsidiary of the LG Group is expected to log a return of between 20 to 40 percent of the publicly offered price, according to market analysts.

This is far lower than the returns of three major firms listed last year ― KakaoBank, Kakao Pay and SK Bioscience ― whose combined returns on the day of listing was over 117 percent.

However, not all publicly offered stocks reported high returns in 2021.

Krafton, the local developer of the popular game, “PlayerUnknown's Battlegrounds,” peaked at around 555,000 won in November of last year, but dropped to 402,000 won on Jan.6. This is much lower than the initial public offering price of 498,000 won.

The game developer had been embroiled in a controversy over its overvalued IPO price even before the KOSPI listing, as evidenced by a recommendation by the regulatory Financial Supervisory Service (FSS) to revise the figure, followed by a delay in institutional book building and public subscription schedules.