[IPO] Seokgyeong AT, 58% of Shares to be Released After Listing... Will Overhang Pressure Increase?

[Asia Economy Reporter Yoo Hyun-seok] Concerns about overhang (potential sell-off volume) are emerging regarding Seokgyeong AT, which is preparing for a KOSDAQ listing. This is because the tradable volume immediately after listing amounts to 58%. However, the company believes that there will be no significant issue as the volume held by venture financing is small.

◆ Tradable volume after listing at 58%... Company states "venture financing volume is small"

According to the securities registration statement submitted by Seokgyeong AT on the 1st, the total number of shares after listing, including public offering shares, is 5,455,000 shares. Among these, 2,260,923 shares (41.45%) are held by the largest shareholder, CEO Lim Hyung-seop (25.04%), executives, and relatives (16.41%), and are locked up for one year after listing. Additionally, the mandatory underwriter Korea Investment & Securities holds 30,000 shares (0.55%) for three months.

Excluding these shares, the tradable volume after listing is 3,194,077 shares, accounting for 58.00% of the total. Existing shareholders and minority shareholders hold 1,622,927 shares and 422,841 shares respectively, totaling 37.48%. Venture financing accounts for 119,309 shares (2.19%). The remainder consists of 1,000,000 shares (18.33%) held by institutional and general public subscribers from the public offering.

Typically, the volume released immediately after listing is less than 50%. For example, Jeil Electric Industry, which was listed on the 26th of last month, had a tradable volume of 26.1% after listing. Other recently listed companies such as Hana Technology (38.43%), T&L (40.81%), Gobio Lab (27.59%), and Nepes Arc (29.6%) also had tradable volumes below 50% immediately after listing.

Seokgyeong AT acknowledged that the tradable volume after listing is relatively high but forecasted that it would not lead to large-scale sell-offs immediately. This is because the volume held by venture financing is small. A company official stated, "Although the tradable volume after listing is somewhat high, most of it consists of general corporations and individual investors. The volume held by venture financing, which is not subject to lock-up, is only 2.19%, so we believe the burden of overhang is not significant."

◆ Expecting an average annual growth of 50% through 2023 with new products... Past performance has been 'inconsistent'

Seokgyeong AT expects to achieve an average annual growth rate of over 50% from this year through 2023. According to the securities registration statement released by the company and the lead underwriter Korea Investment & Securities, sales are projected to grow from 6.7 billion KRW in 2020 to 11.2 billion KRW in 2021, 16.7 billion KRW in 2022, and 23.8 billion KRW in 2023, representing an average annual growth rate of 52.70%.

Seokgyeong AT recorded sales of 6 billion KRW in 2017 but saw a decline to 5.5 billion KRW in 2018. However, sales increased to 6.5 billion KRW last year, and the cumulative sales for the third quarter of this year reached 4.6 billion KRW.

The company cited the fact that sales of existing products have been growing by more than 10% annually as the basis for sales growth. Additionally, for existing products, sales are expected to increase by 10-30% annually due to the expansion of existing customers and the acquisition of new customers. Furthermore, in the electrical and electronics sector, the need for localization has increased due to Japan's export restrictions, leading to a rise in import substitution movements, which is expected to contribute to performance growth.

Alongside this, new products such as materials for 5G substrates, eco-friendly toner additives, and cosmetic color pigment materials are expected to become new growth engines. A company official explained, "The three new growth engine product groups are hollow silica materials for 5G substrate materials, eco-friendly toner additive materials, and cosmetic color pigment materials. We are continuously supplying product samples while discussing the potential for future market formation with existing and potential customers."

Seokgyeong AT primarily operates in the development and manufacturing of functional nanomaterials related to the biohealthcare industry, electrical and electronics industry, coating industry, and other industries. Since its establishment in 2001, the company has secured global-level nano platform technology through continuous research and development (R&D) and investment. Its business areas are divided into dental materials YbF3 and Glass for the biohealthcare industry, toner additives and SiO2 for film materials in the electrical and electronics sector, coating, and other processing sales. The company is entering the KOSDAQ market through a technology special listing.

Meanwhile, Seokgyeong AT plans to offer a total of 1,000,000 shares in this initial public offering (IPO). The desired price range is 8,000 KRW to 10,000 KRW per share. The company aims to raise 8 billion to 10 billion KRW. Based on the lower end of the price range, 2 billion KRW will be allocated to R&D, 3 billion KRW to facility funds, and 3 billion KRW to debt repayment. From the 10th, a two-day book-building process targeting institutional investors will be conducted to finalize the offering price, followed by general investor subscription on the 15th and 16th.