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IPOs

Upward IPO price band revisions at all-time high this year

Mar 02, 2021 (Gmt+09:00)

Upward IPO price band revisions at all-time high this year

This year, South Korean companies preparing for trading debuts have set their offering prices on average about 27% higher than the proposed price bands, marking the highest revisions to date.

The rising discrepancy between the initial price range and the actual offering price appears to be lowering the return rate for initial public offering stocks, industry watchers say.
 
According to the investment banking industry on Mar. 1, some 13 companies, or 70% of the 19 firms that went public this year, revised their IPO price upwards – almost sevenfold the number of companies that raised their offering price last year.

For example, biotech firm NeoImmuneTech set its IPO price at 7,500 won ($6.70), about 17.2% higher than the upper end of the proposed price band between 5,400 won and 6,400 won after its bookbuilding last month.

Other companies, CyberOne Co. and Youil Energy Tech Co., also raised their offering price by 14% compared to the proposed price range ahead of their listing.

This compares to the biggest revision last year, set by Myoung Shin Industry, which put its IPO price 12% higher than the upper end of the proposed price.

The offering price inflation is also evident in companies that saw low bookbuilding demand. On Feb. 24, Prestige Biologics Co. Ltd.'s bookbuilding  attracted weak demand of 370 to 1. But the company went on to set its IPO price in the uppermost range despite the lackluster participation, as around 54% of the orders still exceeded the upper end of the proposed price range.

Industry watchers say the intensified overshooting is fueled by institutional investors submitting high prices to secure IPO shares.

“Sometimes we are exempt from receiving any IPO shares even if we write down the upper end price -- which is why we submit higher prices," said an institutional investor, adding that at times the IPO advisors coax them to lower high prices.

The securities industry expects companies to continue the upward revision of their IPO prices for some time. 

“In the past, companies maintained the proposed price range due to concerns over a potential backlash from investors and to maintain their corporate image. But all of that has completely changed this year," said an investment banking industry official.

“There will be more companies trying to raise as much IPO capital by taking advantage of institutional investors' increased anxiety,” the official said.

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

Danbee Lee edited this article.

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