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[Exclusive] IPOs

Enchem raises IPO price by a record 20% on strong investor demand

The exceptionally high IPO price hike reflects market fever for EV battery materials shares, analysts say

By Oct 20, 2021 (Gmt+09:00)

Enchem CEO Oh Jung-kang (center) and colleagues
Enchem CEO Oh Jung-kang (center) and colleagues

South Korea’s Enchem Co., which is working to list its shares on the Kosdaq market, has decided to raise its initial public offering price by a whopping 20% on stronger-than-expected investor demand.

According to investment banking sources on Wednesday, the manufacturer of electrolytes, a key battery material, will raise its IPO price to 42,000 won ($36) a share, up from the top end of its earlier indicative price of 35,000 won.

The company had initially offered to sell its stock between 30,000 won and 35,000 won, depending on investor demand.

However, its bookbuilding with institutional investors conducted Oct. 15-18 to gauge interest showed more than 1,000 institutions participating, posting a subscription rate of over 1,000 to 1 to receive the company’s shares.

The bookbuilding also showed that over 70% of the institutional investors have committed to the lockup clause, promising not to sell Enchem shares for a certain period following the IPO.

The high commitment rate reflects the recent market fever for battery shares, flying high alongside the take-off of electric cars across the globe, analysts said.

The 20% IPO price hike also marks the highest increase from initial indicative price ranges among Korean shares that have gone public so far, according to industry officials.

Enchem's logo
Enchem's logo

PROFIT-TAKING IN EARLY TRADE

If its IPO price is set at the newly set top end of 42,000 won, the company’s total market capitalization will rise by 100 billion won to 635 billion won. The funds raised from the IPO will also rise to 95 billion won from 80 billion won.

The company has said it plans to use the proceeds to expand its facilities in the US, China and Hungary to double its electrolyte production capacity to 125,000 tons a year.

With the listing, some 97% of Enchem’s shares will be outstanding, and with the lockup clause, about 80% will be available for trading in the first few months.

Still, some analysts say 80% of its stocks in circulation is a relatively high amount and could depress its share price alongside existing shareholders' attempts to sell shares to book gains from the IPO.

The stock is set for its Kosdaq debut on Nov. 1 and individual investors can subscribe to the IPO Oct. 21-22 through Daishin Securities Co. and Shinhan Investment & Securities Co.

Enchem's US plant
Enchem's US plant

AIM TO JOIN GLOBAL TOP 5

Oh Jung-Kang, Enchem’s chief executive, said in a recent interview with The Korea Economic Daily that he aims to grow the company to become one of the world’s top five electrolyte makers with 2.5 trillion won in sales by five years from now.

Formerly part of Samsung SDI Co., Enchem’s revenue increased tenfold to 20.7 billion won in 2016 from 2 billion won in 2013.

Analysts expect Enchem’s sales to post another tenfold increase to about 242 billion won this year.

Lithium-ion batteries for EVs consist of four key materials – anode materials, cathode materials, separators and electrolytes. The electrolyte is the medium that provides the ion transport mechanism between the cathode and anode of a battery cell.

Currently, Enchem is the world’s seventh-largest electrolyte producer with its market share of about 5%, supplying the material to all of the world’s top 10 EV makers, including Volkswagen and Ford.

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

In-Soo Nam edited this article.

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