Hoban Construction Also Delays IPO... Major IPO Candidates Disappear from the Scene

[Asia Economy Reporter Koh Hyung-kwang] Due to the impact of the novel coronavirus infection (COVID-19), volatility in the domestic stock market has increased, causing setbacks in the listing processes of major companies expected to heat up this year's initial public offering (IPO) market. Companies such as SK Biopharm, Hotel Lotte, Hoban Construction, and Kakao Page, whose corporate values were anticipated to reach trillions of won, are struggling to overcome the challenges posed by COVID-19.

According to industry sources on the 21st, Hoban Construction recently withdrew the IPO management personnel stationed at its headquarters. Employees from the underwriting securities firms Mirae Asset Daewoo, KB Securities, and Daishin Securities had been dispatched to Hoban Construction's headquarters since February to carry out practical work for the IPO. Hoban Construction recently discussed with them and decided to postpone the listing schedule. Due to the prolonged COVID-19 situation, the stock prices of construction companies preparing for listing have plummeted, and the public offering market itself has shrunk, leading to a review of the IPO schedule.

Until early this year, Hoban Construction was considered a leading company in the IPO market, with an estimated corporate value of 30 to 40 trillion won and a public offering size of 10 trillion won. An industry insider said, "Hoban Construction is financially stable, so there is no urgent need to rush the IPO schedule," adding, "With the underwriters agreeing to postpone the listing schedule, there are also predictions that listing within this year will be difficult."

The listing of SK Biopharm, which was expected to be a major player in this year's IPO market with an estimated corporate value of 50 trillion won, is also uncertain in the first half of the year. Concerns are growing that SK Biopharm will not receive an appropriate valuation due to the sluggish stock market caused by COVID-19, leading to rumors of a listing delay.

Among companies that have received preliminary review approval for listing on the KOSPI market, SK Biopharm is the only one currently proceeding with the listing process. SK Biopharm received preliminary review approval on December 30 last year and must complete the listing process within six months, i.e., by the first half of this year. If unavoidable circumstances such as sudden market fluctuations occur, the validity of the preliminary review can be extended once (for six months), but SK Biopharm has not yet applied to the Korea Exchange for an extension of the preliminary review validity.

The IPO push for Hotel Lotte, a long-cherished project of Lotte Group Chairman Shin Dong-bin, is also understood to be virtually halted. The duty-free business, which accounts for more than 80% of Hotel Lotte's performance, has been halved, significantly affecting the pricing of the public offering. Hotel Lotte has not yet filed for preliminary review.

Hotel Lotte's current corporate value is estimated at around 5 trillion won, which is one-quarter of the valuation (20 trillion won) when the company first attempted to list in 2016. The public offering price is also predicted to be around 50,000 to 60,000 won, far below the initial desired price of 200,000 won, leading to the assessment that Lotte is not in a position to push forward with the IPO. An industry insider said, "There is currently no progress regarding the IPO for Hotel Lotte," adding, "Due to deteriorating performance, it is difficult to receive a proper valuation, so it seems the process has been halted for the first half of the year."

The IPO schedules of Kakao Page and Kakao Games, both with corporate values in the trillions of won, are also being delayed compared to the original plans. Both companies have completed practical procedures to the extent that they can submit preliminary review applications once the listing decision is made, but due to the worsening stock market situation caused by COVID-19, the listing schedules are being postponed.

The KOSDAQ IPO market is also frozen. Six companies, including SCM Life Science, NFC, LSEV Korea, and Metanet Mplatform, which were scheduled for demand forecasting in March, all decided to withdraw their public offerings. Nobmetapharma, the largest company by market capitalization on KONEX that was pursuing a transfer listing to KOSDAQ, also canceled the remaining listing schedule and withdrew its securities registration statement. Park Jong-sun, a researcher at Eugene Investment & Securities, said, "The last time the public offering amount exceeded 1 trillion won in the domestic IPO market was Celltrion Healthcare, which listed in July 2017," adding, "If the COVID-19 situation settles, the IPO market could normalize again from the second half of the year."