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IPO performances

Korea’s liquidity-driven IPO market sets slew of fresh records in 2020

Dec 28, 2020 (Gmt+09:00)


As the stock markets around the globe took a wild ride amid the pandemic in 2020, ample liquidity led to plenty of fresh records in the initial public offerings market.

In the US, legendary Wall Street investor Warren Buffett in September bought into an IPO for the first time in 64 years. For decades, the Oracle of Omaha has warned investors of the danger of investing in IPOs, calling it an unnecessary gamble.

In South Korea, retail investors, widely known as “the Ants,” have bravely gambled with newly listed shares, setting many records in the local IPO market.

As the pandemic put a damper on the stock market, pushing the benchmark index to a yearly low in March, a number of companies put off their planned IPOs during the first half of the year.

But the tables turned with a successful debut of SK Biopharmaceuticals Co. on the Korea Exchange in July.

BIO STOCK INITIATES IPO CRAZE

SK Biopharmaceuticals initiated the Korean IPO craze by amassing as much as 31 trillion won ($28.2 billion) in deposits from investors for new share subscriptions.

Its shares hit the daily limit high of 30% for three straight days upon listing, becoming the first stock on the main bourse to set such a record. Its shares have risen to a high of 270,000 won from its IPO price of 49,000 won.

Analysts said the IPO's success was owing to the company’s bold decision to present its assessed value 1 trillion won less than market expectations, attracting many investors hunting for bargains.

As people got rich quick by investing in SK Biopharmaceuticals, ensuing IPOs also made companies like Kakao Games Corp. and Big Hit Entertainment Co. blockbusters of the year.

Both companies pulled in a record 58 trillion won, each, in deposits from investors for subscriptions.

For all of 2020, investors have put in a total of 300 trillion won in deposits to buy shares from public offerings, up threefold from the previous year.

Investors’ keen interest in IPOs has brought in unprecedented competition for new shares.

Kakao Games topped the list of shares with the most competitive bookbuilding for institutional investors, as bids for the stock outnumbered offers 1,479 to 1. In subscriptions for general investors, Ilooda Co., a medical equipment manufacturer listed on the junior Kosdaq market, saw its shares oversubscribed by a record 3,040 times. Data showed 33 new shares, or 47% of this year’s IPOs, posted a subscription rate of more than 1,000 times.

DDASANG, IPO MARKET WORD OF THE YEAR

Record-breaking demand for IPO shares has seen the creation of a new word, “ddasang,” market slang that refers to a new stock opening at double the offering price and hitting the daily limit on the first trading day.

Just one or two companies a year showed such a pattern previously, but this year a record 10 IPO shares joined the ranks of ddasang, with some flying even higher by reaching the upper limit for two straight days or even three days in a row.

As a result, brave investors who bought into IPO shares are now sitting on average gains of over 60%.

Cancer immunotherapy drug company Vaxcell-Bio Therapeutics Co. has risen as much as 633% so far this year since its Kosdaq debut in September.

But not all IPO shares hit the jackpot.

BBC Co., which makes daily necessities such as toothbrushes, is currently trading at 40% below its IPO price on the Kosdaq.


When shares of Big Hit Entertainment, the label behind global boy band sensation BTS, were falling sharply for days after their successful debut, some retail investors who suffered losses demanded that the company buy back their shares.

LIMITED GAINS SEEN IN 2021 IPO MARKET

In 2021, investors won’t likely reap as high gains from investing in IPO stocks as they did this year.

“Companies will aim to raise more money from the stock market by offering their shares at higher prices. Investors, in turn, will have slimmer chances of buying blue chips at IPOs due to intensified competition,” said Samsung Securities analyst Chung Myung-ji.

A number of attractive companies valued in the trillion won range are in the 2021 IPO pipeline.

Game developer Krafton Inc. and two units of the country’s top mobile messaging app Kakao Corp. – KakaoBank and Kakao Pay – are set to make debuts in Korea next year.

Analysts expect local firms to raise some 15 trillion won from the IPO market in 2021, three times higher than this year.

Write to Jong-Woo Kim and Ye-Jin Jun at jongwoo@hankyung.com

In-Soo Nam edited this article.

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