[Practical Finance] To Invest in IPO Stocks... Confirm Securities Firm Allocation and Deposit Margin Required

If Large Deposit Amounts or High Competition Rates Are Burdensome, Indirect Investment Through IPO Funds Is Also Possible

[Asia Economy Reporter Geum Bo-ryeong] There are two ways to invest in IPO stocks. One is to directly participate in the IPO subscription and receive allocated shares, and the other is to buy IPO funds. If the investment amount is large, it is advantageous to apply for subscription, and if the deposit is burdensome, buying IPO funds is preferable.

◆Should you try buying IPO stocks directly?= IPO stocks differ from trading already listed stocks in that you invest before the listing. Since you cannot invest whenever you want, you need to check the subscription schedule on the Korea Exchange website, etc. As of the 24th, SK Biopharm is conducting a general subscription from the previous day until this day.

You cannot buy IPO stocks from just any securities firm. There are specific securities firms that sell IPO stocks. The quantity of IPO stocks varies by securities firm. For SK Biopharm, the total IPO stock quantity is confirmed to be 19,578,310 shares. Of these, 20% is preferentially allocated to employee stock ownership, and the remaining 80% is offered to the general public. Among the 80%, 60% goes to institutions, so the IPO stocks allocated to general investors are 20% of the total, which is 3,915,662 shares. Among securities firms, only NH Investment & Securities, Korea Investment & Securities, SK Securities, and Hana Financial Investment allow subscriptions. By securities firm, NH Investment & Securities is allocated 1,801,898 shares (46%), Korea Investment & Securities 1,212,816 shares (31%), SK Securities 554,430 shares (14%), and Hana Financial Investment 346,518 shares (9%).

Choosing a securities firm is an important matter. Since the IPO stock quantity and number of applicants differ by securities firm, it directly affects the competition rate. If many applicants flock to a securities firm with a larger IPO stock quantity, the competition rate rises, and the number of shares you can receive may actually decrease. You can check the IPO competition rate on each securities firm's website until the deadline.

IPO subscription allocates more shares the more investment money you put in. For example, if the subscription deposit rate is 100% and the competition rate is 100 to 1, putting in 1 million KRW as a subscription deposit will allocate shares worth 10,000 KRW. Investing 2 million KRW will get you shares worth 20,000 KRW, and investing 3 million KRW will get you shares worth 30,000 KRW. For SK Biopharm, with an IPO price set at 49,000 KRW and a subscription deposit rate of 50%, the deposit per share is 24,500 KRW. If you want to subscribe for 100 shares, you need to put in a deposit of 2,450,000 KRW. However, if the competition rate is 100 to 1, you will only receive 1 share, so you need to put in 24,500,000 KRW to get 10 shares.

It is safe to open a securities firm account and deposit the subscription deposit before the subscription date. Most securities firms grant subscription eligibility only to accounts opened before the subscription start date. However, if you open a consignment account at SK Securities by this day, you can subscribe to SK Biopharm. Subscription applications can be made through securities firms' Home Trading System (HTS), Mobile Trading System (MTS), branches, or internet websites.

◆Indirect investment through IPO funds= If the large deposit amount or fierce competition is burdensome, buying IPO funds is another option. Most IPO funds are bond-mixed types, investing 70-80% in bonds and bond-related collective investment securities, and 20-30% in IPO-focused stocks.

Recently, funds have continuously flowed into IPO funds. According to fund evaluator FnGuide, as of the 23rd, 134.2 billion KRW flowed in net over one week into 110 IPO funds with assets under management of 1 billion KRW or more. Among the 43 theme funds classified by FnGuide, excluding domestic equity ETFs, IPO funds attracted the most capital. Over one month, 268.6 billion KRW flowed in, ranking first in asset growth. IPO funds have shown returns of 0.85% over one week and 5.18% over three months.

Oh Kwang-young, a researcher at Shin Young Securities, explained, "The fund type to pay attention to in the second half of the year is IPO funds. As the number of listed stocks increases, opportunities to earn profits also increase, and investor interest will grow further." He added, "Since IPO funds operate with different IPO investment strategies per fund and use various investment strategies such as mandatory lock-up agreements to secure IPO shares considering competition rates, it is essential to check in advance what investment strategy the fund you are investing in uses and what stocks it currently holds."