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IPOs

Lotte Rental shelves share sale plan as IPO market cools

Oct 28, 2020 (Gmt+09:00)

Lotte Group has indefinitely postponed its plan to list Lotte Rental Co., in the latest sign of a cooldown in the local initial public offering market.

According to the investment banking industry on Oct. 28, Lotte has canceled a Nov. 4 presentation in which the company had planned to share its IPO plans with four major local brokerages.

Sources said Lotte Rental, the country’s largest car rental company, has been cautious about pushing ahead with its IPO plan amid the differing positions of Hotel Lotte Co., which owns 42% of the firm, and financial investors over the share sale.

Lotte Rental, the car rental service unit of Lotte Group, is expected to resume its IPO push early next year, the sources said.


“The company’s earnings are not bad but it certainly has limitations in its profitability and growth potential as a car rental firm. It may need to present a roadmap and IPO prices that investors find attractive,” said an investment banking official.

Lotte Rental posted an operating profit of 68.2 billion won ($60.2 million) and 1.1 trillion won in revenue in the first half of this year.

Lotte’s IPO pushback comes amid growing skepticism about new share sales, particularly after the lackluster share movement of Big Hit Entertainment Co., which was touted as the IPO blockbuster of the year.

Big Hit, the entertainment agency behind global boyband sensation BTS, saw its shares drop 22.3% on the second day of trade after rising by the daily limit of 30% on its debut in mid-October. The stock has fallen 55% from its IPO highs to close at 158,500 won on Wednesday.

IPO BUZZ WANES


Analysts say the IPO buzz in Korea is waning as shares from a series of high-profile debuts, including SK Biopharmaceuticals Co. and Kakao Games Corp., lose steam.

There were 47 newly listed companies in Korea this year, with average returns from their offering shares touching around 50%. But only a few have actually made notable profits as many individual investors sold off their shareholdings on the third or fourth day of listing for quick gains.

MARKET SENTIMENT WEAKENS

As the market sentiment toward newly listed shares turns weaker, some local companies, set to go public, are either cutting their prospective IPO prices or reducing their number of shares on offer.

Clinomics Co., a local gene diagnosis company that is selling its shares to individual investors next month, has lowered its offering price by 15% to a range of 10,900 won and 13,900 won from the initially set range of 12,800 won and 16,300 won.

The company has also cut the number of offered shares by 14% to 2.29 million and delayed its IPO from November to December.

Write to Ye-Jin Jun at ace@hankyung.com

In-Soo Nam edited this article.

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