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IPOs

Korea’s slated IPOs fail to attract investors

The offering prices would be polarized given the popularity gap between industries, sources say

By Oct 25, 2021 (Gmt+09:00)

▲ Tae-Wook Kim (middle), CEO of color cosmetics company iFamilySC. Co.
▲ Tae-Wook Kim (middle), CEO of color cosmetics company iFamilySC. Co.

Investor confidence has waned in South Korea in line with stock market instability. Stock prices of some newly listed companies have failed to meet institutional investors’ expectations, seeing some bid rates plunging to double digits. And bids for some initial public offering shares have also seen lukewarm attention from retail investors.

Color cosmetics company iFamilySC. Co., slated to go public this Thursday, closed bids for its IPO on Oct. 19 with a low competition rate of 21 to 1 and approximately 53.4 billion won ($45.7 million) in deposits. Demand from institutional investors saw competition of only 63 to 1. The reasons include a highly set offering price and skepticism from institutional investors, according to industry sources.

Property deed research firm Refine also saw just 64 to 1 in demand from institutional investors Oct. 14-15, the third-lowest rate this year following used car retailer K Car Co.’s 40 to 1 and iFamilySC's before-mentioned 21 to 1. The initial offering price was set at the low end of the desired price, between 21,000 and 24,000 won, as the majority of institutional investors submitted lower-than-desired prices in the bookbuilding.

“Many institutional investors, who used to participate in all bookbuildings, have since last month begun to be more careful in selecting investees and focusing on sectors,” said the CEO of an investment management firm.

Vaccine developers also have been affected by market sentiment. Cha Vaccine Institute, a hepatitis B and flu vaccine developer set for its Kosdaq debut on Oct. 22, posted a subscription rate of 42 to 1 with investor demand of only 206 to 1. The institute failed to attract investors even after lowering the initial offering price to 11,000 won, the bottom end of the desired price.

Simone Acc. Collection Ltd., an original development manufacturer (ODM) for Michael Kors, Marc Jacobs and Coach, called off its IPO plan due to low demand from institutional investors earlier this month.

It was just tens of times oversubscribed on the first day, while most institutional investors placed bids at prices lower than the company’s indicative price range of 39,200 won to 47,900 won, according to IB industry sources. The handbag manufacturer failed to attract enough investors for an IPO with a plan to spend 30-40% of its net profit on dividends after listing. Investors saw the company’s initial IPO prices as excessive, given perceived limited growth in the global luxury handbag market, according to the sources.

Seasoning developer S&D Co. and health functional food maker FromBio Co. have also failed to garner attention both in demand forecast from institutional investors and subscription from retail investors. The stock prices of both companies on their debuts were below their offering prices.

On the other hand, firms related to secondary batteries and semiconductor equipment are gaining popularity. Secondary battery component manufacturer GI Tech Co. saw 2968 to 1 in retail investors’ bid rate. Semicondoctor component manufacturer Asflow Co. and secondary battery material maker Onejoon Co. saw bid rates of 2143 to 1 and 1464 to 1, respectively, in subscriptions last month. Enchem Co., an EV battery maker which held its subscription earlier this month, also saw about 2000 to 1 in bookbuilding.

As South Korea’s stock market enters a correction phase, the difference in the return on public offering stocks will be even more stark, an IB industry source said.

"The IPO market may face a polarization in public offering prices. The popular sectors may gain more attention while the firms of unpopular sectors may fail to attract investors even with lowered IPO prices”, the source added.

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

Jihyun Kim edited this article
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