Outlook dim on SOCAR's post-IPO valuation

SOCAR CEO Park Jae-wook speaks during a press conference on its initial public offering in Seoul, Aug. 3. Yonhap

By Lee Min-hyung

Outlook remains murky over the post-initial public offering (IPO) stock movements of SOCAR, the largest car-sharing app operator in Korea, amid weaker-than-expected demand from investors and uncertain macroeconomic conditions here and abroad, analysts said.

The company plans to go public on Monday after fixing its IPO price at 28,000 won ($21) per share early this month. This price was far below earlier expectations of the firm's estimated price range of between 34,000 won and 45,000 won.

But the firm's stock price is forecast to be weak even after the listing on the benchmark KOSPI, as few institutional investors have submitted a document in which they commit to not selling SOCAR shares for a certain period of time.

About 67 percent of all issued shares will be allocated to institutional investors, and more than 92 percent of them have not reached any agreement on it, which raises concerns that they may engage in a mass selloff of SOCAR shares soon after the listing.

The ongoing stock doldrums ― sparked by global macroeconomic uncertainties ― are also cited as another factor putting more pressure on the future course of SOCAR shares.

A number of big companies that were supposed to go public this year have withdrawn their plans due to the weak stock market sentiment. Since June of last year, when it reached a historic high of more than 3,300 points, the main bourse has lost momentum for growth and is widely forecast to remain weak until the third quarter, when the U.S. Fed and the Bank of Korea are expected to push for additional rate hikes.

“The weak demand from investors is attributable to the firm's overvaluation controversy when compared with that of overseas mobility platforms, as well as lingering market concerns about the company having little competitive edge over local rental car firms,” SK Securities analyst Han Seung-han said.

SOCAR had hoped to attain a market capitalization of as high as 1.55 trillion won had it succeeded in setting its IPO price at the upper range of 45,000 won per share.

But the company has since been mired in an overvaluation dispute, as its market cap exceeds that of Lotte Rental, the nation's largest car rental service provider. Lotte Rental's market cap is around 1.35 trillion won. The latter company generated an operating profit of 245.5 billion won in 2021.

But SOCAR suffered an operating loss of 21 billion won during the same period, even though the company achieved a turnaround with an operating profit of 1.4 billion won in the second quarter of 2022.