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IPOs

Chicken stock Kyochon debuts at upper limit, allays IPO concerns

Nov 12, 2020 (Gmt+09:00)

South Korea’s No. 1 fried chicken franchise operator Kyochon F&B debuted on the main bourse with its shares rising to the upper daily limit, dissipating market concerns over initial public share sales, recently showing a pattern of a sharp drop after a much-touted IPO.

Korea’s first chicken stock to go public started Thursday at 23,850 won apiece on the Korea Exchange, nearly double its 12,300 won offering price.

Shares fell to a low of 21,700 won within three minutes of trading, bringing back memories of Big Hit Entertainment Co., which debuted with great fanfare but crashed in the sessions following.

However, Kyochon quickly rebounded and extended gains throughout the day, closing up by the daily limit of 30% at 31,000 won on its first day of trading.


The gains were led by individual investors, who snapped up 74 billion won ($66.4 million) worth of the chicken stock. Institutional investors sold 51.8 billion won in shares, while foreigners unloaded 16.5 billion won worth of Kyochon's shares.

Last week, the country’s largest fried chicken franchise operator pulled in a staggering $8.2 billion in deposits during its two-day public subscription.

The company's shares were oversubscribed by 1,318 times with demand for over 1.5 billion shares, although the company had allocated 1.16 million, or 20%, of the shares for retail investors.

Nevertheless, individual investors were drawn to Kyochon's shares as there was less likelihood of large blocks of shares spilling into the market or a stock overhang upon its listing.

Of Kyochon’s 24.98 million total outstanding shares, about 5.8 million shares, or 23.2% of the total, are available for trading, as the remaining shares owned by the company’s founder are under a six-month lockup.

 BIG HIT DÉJÀ VU?

Kyochon’s share movement Thursday compares with Big Hit Entertainment Co., the label behind global pop sensation BTS, which saw large share blocks being sold off by financial investors upon its listing, dragging down its shares from day one.

Big Hit shares finished down 4% at 157,500 won on Thursday, off 55% from their high of 351,000 won in mid-October. The company presented the fair value of its stock at 160,000 won before its IPO.


Some industry analysts say that Kyochon may follow in the footsteps of Big Hit given the high valuation of its shares.

Before listing, Kyochon said it saw the fair value of its shares at 15,043 won.

Market officials said Kyochon’s shares may rise further from current levels as the company expands its revenue base through an aggressive foray into overseas markets.

The company aims to post 770 billion won ($680 million) in revenue and an operating profit of 100 billion won by 2025, with a substantial amount raised from overseas operations.

Kyochon currently runs about 1,000 franchise outlets across the country. Last year, Kyochon F&B posted around 380 billion won ($334 million) in revenue, a 12% year-on-year increase, and the highest revenue of fried chicken chains registered with the country’s Fair Trade Commission.

Write to Byung-hun Yang at hun@hankyung.com

In-Soo Nam edited this article.

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