Korean companies delaying IPOs amid lackluster KOSPI

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By Lee Min-hyung

Korean companies are delaying their schedules for their initial public offerings (IPOs) amid the weakening performance of the stock market here.

Up until early this year, market sentiment was better than it is now, so, many companies, planning to go public were busy arranging pre-IPO schedules with underwriters in the hopes that they would be able to attain windfalls through IPOs, just as many other firms did last year.

However, with market sentiment weakening rapidly in more recent weeks, most companies are taking a wait-and-see approach, adjusting their IPO schedules to the latter half of this year.

Hyundai Engineering was the first to make such a decision. The company had been drawing keen attention from investors, as its post-IPO valuation was estimated to reach as high as 10 trillion won.

However, after the company decided to cancel its plans on Jan. 28, other companies also moved to follow suit for similar reasons as the Hyundai affiliate. At that time, Hyundai Engineering explained it had decided to drop the IPO procedure on concerns that the market would not be able to evaluate.

Daemyoung Energy, a new renewable energy business operator, also decided recently to withdraw its plan to go public on the secondary Kosdaq, as most institutional investors had offered lower initial offering prices than the company had been expecting.

A number of medical companies ― such as Future Medicine and Finemedix ― took similar paths, withdrawing their plans to undergo pre-IPO screening procedures.

These moves come in response to sharp declines of the benchmark KOSPI and the tech-savvy KOSDAQ since mid-January of this year. The main bourse heated up throughout 2021, hovering at over the 3,000-mark on pandemic-induced market liquidity.

Yet this year, the local stock market has been losing steam for additional growth due to multiple external uncertainties ― such as the U.S. Fed's imminent rate hikes and the outbreak of war in Ukraine.

“It is too early to say that investors' sentiment on the local IPO market has completely frozen, and chances are that the sentiment will revive itself sometime in the latter half of this year after some of the lingering external uncertainties are cleared away,” an industry analyst said.