Kakao Games Aims for 'Ttasant'... Large Funds Ready to Start

General Investor Subscription on Next Month 1-2
IPO Price Set at 24,000 Won

Despite Record High Competition Rate in Domestic IPO
Grab the 'Lotto' of Public Offering Subscription
Series of 'Yeongkkeul' Loan Investors

[Asia Economy Reporters Juyoun Oh and Minwoo Lee] Recently, Mr. A, a man in his 30s who just completed a real estate sales contract, still has about three months left until the final payment date. However, thinking it would be a waste to leave a large sum of money idle, he decided to put it all into the Kakao Games IPO subscription scheduled for the 1st and 2nd of next month. Wanting to grow his funds even in the short term, he was looking for an investment opportunity and decided to act upon hearing the subscription news. Since SK Biopharm, which went public in June, experienced a 'ttasang' (a phenomenon where the stock price doubles from the IPO price on the first day and then hits the upper limit), he expects even fiercer competition this time and plans to take out a generous amount of credit loans. Mr. A said, "Since I work in the financial sector, I can borrow up to 150 million won at an interest rate of 2-3%. Even if I fail in the subscription, I can repay it, so there is no burden. If the subscription is successful, I can earn several tens of times the interest, so there is no reason to hesitate."

Kakao Games is heating up the IPO market in the second half of the year. In the demand forecast targeting institutions, Kakao Games recorded the highest competition rate ever since the demand forecast system for IPO allocations was introduced in 1999, with the largest number of institutions participating. General investors are also engaging in 'younggeul loans' (borrowing to the fullest extent, even to the point of exhausting all resources), regardless of whether it is credit loans or mortgage loans, to participate in the general subscription.

Kakao Games Records Highest Competition Rate in Domestic IPO History at 1479 to 1
IPO Price Set at the Top of the Desired Band at 24,000 Won
Subscription Game of Wits... Differences According to Lead Securities Firms' Competition Rates

According to related industries on the 31st, the general subscription for individual investors will take place on the 1st and 2nd of next month. The market has already taken the success for granted. During the SK Biopharm subscription on June 23-24, a deposit of 30.9889 trillion won was collected, surpassing the 30.0649 trillion won record set by Cheil Industries six years ago. This was due to abundant liquidity in the market, a low-interest-rate environment, and growth potential, attracting even investors who previously had little interest in stocks. The quantity allocated for SK Biopharm's general subscription was 3,915,662 shares, but a total of 1,264,853,070 shares were applied for, resulting in a competition rate of 323 to 1. Due to the fierce competition, investors who deposited 100 million won were only allocated about 12 to 13 shares. The market expects a similar frenzy for Kakao Games.

According to the demand forecast results announced that day, a total of 1,745 domestic and foreign institutions participated, recording the highest competition rate in domestic IPO history at 1479 to 1. Kakao Games' desired IPO price band was 20,000 to 24,000 won, and the IPO price was set at the top of the band at 24,000 won. It is said that 100% of the participating volume offered prices at or above the upper limit of the price band, showing intense enthusiasm.

The total funds to be raised through this IPO amount to 384 billion won. If Kakao Games shows a competition rate similar to SK Biopharm's 300 to 1, investors would need to deposit at least 3.6 million won to receive one share. However, some expect the competition rate to far exceed this. If the general subscription competition rate reaches 400 to 1, an investment of 120 million won would be required to receive about 25 shares. Among general investors, the game of wits has become even more intense. During the SK Biopharm IPO subscription, SK Securities had the lowest competition rate on both the first and second days. This means that even with the same deposit, the number of shares allocated varies depending on the lead securities firm.

Mr. B, an office worker, said, "During the SK Biopharm subscription, I deposited 100 million won equally but received 11 shares from one place and 16 shares from another," adding, "For the Kakao Games IPO subscription, I plan to choose the securities firm with the lowest competition rate among Korea Investment & Securities, Samsung Securities, and KB Securities on the first day." Meanwhile, concerns have been raised that subscriptions through excessive loans could be burdensome. Investor C said, "I think the competition rate could approach 2000 to 1. In that case, even if you deposit 360 million won, it might be difficult to receive more than 20 shares, so I don't think it's wise to take out loans worth hundreds of millions of won just to subscribe."

IPO Subscription = A 'Lotto' with Expected Winning
SK Biopharm Nearly Sextupled in 4 Trading Days After Listing
Beware of 'Flash Rises'... Stock Prices Decline After Initial Hype

Despite these concerns, funds are pouring in because investors regard IPO subscriptions as a 'lotto' with expected winning. Most stocks listed this year have surged sharply compared to their IPO prices. In the case of SK Biopharm, after listing on July 2, the price rose to 599% (269,500 won) of the IPO price of 45,000 won within just four trading days. About ten employees who were allocated shares through employee stock ownership plans resigned in succession. Their average investment principal was 579.18 million won, reportedly earning an average capital gain of 1.6 billion won per person.

Lemon, a nanomaterials specialist that went public in February during an IPO drought, also rose to 155% (11,200 won) of its IPO price of 7,200 won on the first day of listing. Later, on March 24, it soared to 23,200 won. Stocks listed after SK Biopharm also succeeded in attracting attention. APro, a secondary battery equipment manufacturer listed on the 16th of last month, had an IPO price of 21,600 won. However, the day after listing, it surged to 62,900 won, 291% of the IPO price. Withus Pharmaceutical reached 257% (40,850 won) of its IPO price on the day of listing.

However, all these stocks experienced only brief price surges. Unlike the initial hype, most have declined. Even SK Biopharm, the largest among them, dropped to 177,000 won on July 17, ten days after reaching its peak of 269,500 won. As of 9:50 a.m. that day, it was trading in the mid-160,000 won range. APro also fell to 33,000 won on the 24th, about half of its peak price of 62,900 won within a month. Withus Pharmaceutical dropped to 19,150 won on the 21st, about 120% of its IPO price.

A financial investment industry official explained, "In the past, IPO subscriptions were events where investors participated expecting long-term corporate growth, but now they have become a kind of one-time lottery event," adding, "This is evidence that investors are quickly identifying various methods and moving swiftly in a situation where real estate investment and others are restricted."