"Money Flows In" Hot February IPO... Double-Digit Public Offerings and Record High Fundraising Amounts

Blockbuster Success in February Following January... Liquidity Effect
13 Newly Listed Companies... Highest Number in 19 Years
Record High Public Offering Amount in 15 Years

[Asia Economy Reporter Lee Seon-ae] The fever for initial public offerings (IPOs), which set various new records in January, is expected to continue in February. Thanks to unprecedented liquidity released into the stock market and the effect of equal allocation for individual investors, the public offering market is anticipated to be highly successful.

According to the Korea Exchange on the 4th, there are currently 13 companies planning to list and conduct public subscription in February. Five companies?Soluem (listed on the 2nd), Wider Planet and Rainbow Robotics (listed on the 3rd), Prestige BioPharma and iQuest (scheduled to list on the 5th)?all set their public offering prices at or above the upper limit of the desired price range and recorded institutional demand forecast competition rates exceeding 1000 to 1, attracting significant attention. Additionally, eight companies including PNH Tech, C-Lab, Yuil Enertech, Oros Technology, Vuno, Biodine, Life Semantics, and Nano CMS are preparing for listing.

In the past five years, the number of newly listed companies in February was around five. After recording double-digit listings of 10 and 24 companies in 2000 and 2002 respectively, this February is expected to mark the highest number of listed companies in 19 years. Furthermore, it is likely to set the record for the most companies listed in the same month since 2003.

Prestige BioPharma, scheduled to list on the KOSPI market, is expected to dominate this month’s IPO market with a public offering amount of 383.5 billion KRW and an estimated market capitalization of 1.9 trillion KRW. Considering this, the expected public offering amount for the February IPO market is estimated to be between 650 billion and 700 billion KRW, with an estimated market capitalization ranging from 3.6 trillion to 3.8 trillion KRW. Researcher Park Jong-sun of Eugene Investment & Securities noted, "In terms of public offering amount, this will be the highest since 2006’s 950.4 billion KRW after 15 years, and in terms of estimated market capitalization, it will be the highest since 2006’s 12.9 trillion KRW."

There were seven companies listed in January (one on KOSPI, six on KOSDAQ). Considering that the average number of new listings in January over the past six years was only two, this was an extraordinary surge. It is the highest number of listings in the same month over the past decade. The public offering amount was 142.1 billion KRW, the highest for January in 10 years, and the market capitalization was 803.4 billion KRW, also the highest for the same month in the past decade.

The competition rate also set new records. The January IPO market recorded an average institutional demand forecast competition rate of 1345:1 and a general subscription competition rate of 1897:1, both the highest ever (compared to January in the past five years). Finger recorded the highest institutional demand forecast competition rate ever, and NBT recorded the highest general subscription competition rate ever. Notably, NBT, the first newly listed company of the new year, recorded a demand forecast competition rate exceeding 1400 to 1, and its public subscription competition rate reached 4398 to 1, setting the highest competition rate among KOSDAQ listed companies.

The reason the IPO market has been hot since the start of the new year is largely due to abundant market liquidity. Customer deposits, which were about 30 trillion KRW as of January 2020, showed explosive growth starting from March 2020, when the COVID-19 pandemic severely impacted the stock market, and have now more than doubled to about 70 trillion KRW. The rapid rise of the stock market also contributed to investors’ interest shifting toward the IPO market. The stock market affected by the COVID-19 spread recorded KOSPI at 1457.64 and KOSDAQ at 428.35 as of March 19, 2020, then quickly rebounded with KOSPI surpassing 3200 and KOSDAQ exceeding 1000 intraday.

Researcher Na Seung-du of SK Securities explained, "While some investors chased the upward trend, more investors chose a medium-risk, medium-return strategy to reduce risk. The IPO market emerged as an attractive investment alternative for investors choosing this strategy, which manifested in competitive public offering participation."

However, as market volatility increases, securities firms predict that the returns of newly listed stocks will vary. Market volatility has indeed expanded recently. For example, the standard deviation of daily returns for KOSPI was 1.2 in January 2020 but rose to 1.9 in January 2021. As market volatility expands, some investors are beginning to realize profits. In particular, in the IPO market, investors’ desire to realize gains on allocated shares is expected to be stronger.

Researcher Na emphasized, "Although the opening price was formed higher than the public offering price, it is important to note that some companies have recorded closing prices lower than the opening price on the first day of listing. Depending on the growth momentum of the upstream industries, the post-listing returns of newly listed companies are likely to vary."