Fizzling IPO boom? Korean IPO shares make dull debuts

C&C International Co., South Korea's leading color cosmetics manufacturer, became the fifth company this year to see its share price slide below its IPO price on the first day of its domestic listing, a sign that the overheated IPO market is cooling.

On its first trading day on May 17, C&C, an original design manufacturer (ODM) of color cosmetic products, opened slightly below its issuing price of 47,500 won ($42) on the junior Kosdaq market. At one point, it tumbled to as low as 40,800 won before closing at 41,150 won, down 12.9% from its IPO price.

C&C designs and manufactures lipsticks, eyeshadows and other color cosmetics for more than 100 cosmetic brands, including Amorepacific Corp., CLIO Cosmetics Co. and the L'Oréal affiliate Stylenanda.

The cosmetics manufacturer priced its IPO at the top end of its 35,000-4,7500 won range after its shares were 1,029 times oversubscribed by institutional investors last month. Its share issuance price applied the lowest discount rate among Korean IPOs year to date, down 5.9% from the industry's average price-to-earnings ratio.

H.PIO Co., a health supplement food maker, is another Kosdaq-listed stock that has been trading below its IPO price of 22,000 since its market debut on May 14. On its first day of listing, it plunged 24% to close at 16,750 won.

"Despite its low circulation volume, investors rushed to take profit on C&C on the first day of listing," said a brokerage analyst. 

Some 31 companies listed in South Korea so far this year were over 1,800 times subscribed during their bookbuilding processes. Among them, more than half, or 18 companies, revised their IPO prices upwards from their indicative ranges. This move limits room for additional sharp gains in the post-IPO share price. 
 
The offering price inflation was fueled by institutional investors submitting high prices in competition to secure IPO shares. Many of them turned sellers immediately after the companies' stock market debuts.

Another factor shifiting investor sentiment to IPO shares is the lackluster performance of SK IE Technology (SKIET), which listed on May 11.

Unlike its sister companies -- SK Biopharmaceuticals Co. and SK Bioscience Co. -- that posted strong debuts on the Korea Exchange between June 2020 and early this year, SK IET failed to double on its debut. 

The battery materials subsidiary of SK Group priced its offering at the top end of its proposed range at 105,000 won. With a market capitalization of 10 trillion won, it advanced 47% to end at 154,500 won on the first day of trading. By Monday's market close, it had declined to its lowest level of 138,000 won.

"I am disappointed about the poor performance of the shares I secured after fierce competition," said an individual investor of C&C, the retail portion of which was 898 times oversubscribed. 

"Now that we realize not all IPO shares will make money, we will flock to a few top picks."  

Write to Ye-Jin Jun at ace@hankyung.com
Yeonhee Kim edited this article.