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IPOs

SM Line joins growing list of S.Korean IPO dropouts

Despite surging freight rates and hefty H1 earnings, top shareholders' partial exit plan via IPO meets a frosty reception

By Nov 03, 2021 (Gmt+09:00)

A SM Line container ship departs from the port of Busan
A SM Line container ship departs from the port of Busan

SM Line Corp. on Wednesday became the latest South Korean company to drop its initial public offering plan on disappointing institutional interest.

The shipping company, wholly owned by the construction-focused SM Group, had planned to raise between 609 billion won and 846 billion won ($515 million-$716 million) by going public on the junior Kosdaq market this month.

But demand from institutional investors fell short of its expectations and the company on Wednesday withdrew its IPO application. 

"In the bookbuilding process (on Nov. 1-2), we found it difficult to receive a proper valuation," the company said in a regulatory filing. "Taking various conditions into account, we agreed with our IPO lead manager to withdraw the IPO plan."

The merchant liner had planned to float 33.8 million shares at a price between 18,000 won and 25,000 won apiece. NH Investment & Securities Co. managed the IPO.

With the global shipping industry recovering from pandemic lows, SM Line's first-half operating profit surged to 308.9 billion won, more than double that of the full-year operating profit of 140.5 billion won the previous year. 

But investors turned a cold shoulder on the planned IPO, of which the shares owned by its existing shareholders accounted for about half of the total issues on offer. Samla Midas, a construction materials supplier, holds a 41.36% stake in SM Line as the top shareholder.

Institutional investors also were cautious about the shipping industry's outlook and how much sea freight rates would continue to rise, according to investment banking sources.

In 2016, SM Line was created after SM Group, formerly known as Samla Midas Group, took over assets of bankrupt Hanjin Shipping Co. for 37 billion won.

FIZZLING IPO BOOM

SM Line was supposed to become the country’s first shipping company IPO since the market debut of KSS Line in 2007.

It was not the only Korean company to ditch an IPO plan this year. Last month, Simone Acc. Collection Ltd., a handbag maker, abandoned its IPO plan due to tepid interest.

The IPO cancellation hindered Blackstone’s plan to pocket up to 320 billion won from the listing. The US PE firm holds a 30% stake in the original development manufacturer (ODM) for Michael Kors, Marc Jacobs and Coach.

Simone founder and Chairman Park Eun-kwan
Simone founder and Chairman Park Eun-kwan

A spate of the recent IPOs in South Korea also met with cold responses on the prospect of higher interest rates, which would likely squeeze market liquidity.

Last September, the country's largest used car seller K Car Co. had to cut its IPO price and the number of shares on offer as well. Its 40:1 competition rate during the bookbuilding process marked the lowest rate for this year’s IPO in South Korea. The company is wholly owned by South Korea-based PE firm Hahn & Co.

Lower-than-expected IPO valuations also forced other IPO candidates to drop out of the market, following downward revisions to the offering price by Krafton Inc., the label behind the popular online game PUBG, and SD Biosensor Inc., the country's top test kit maker.

Anchor Equity Partners in June scrapped a plan to list coffeehouse chain A Twosome Place. It was supposed to become South Korea's first listed coffee chain.

Write to Tae-ho Lee at thlee@hankyung.com

Yeonhee Kim edited this article

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