Why Do Hot IPOs Slip Right After Listing?

Profit-taking after listing
SK바사 falls for second day after double price jump
21 newly listed stocks this year average -7.22% return from opening price

[Asia Economy Reporter Song Hwajeong] SK Bioscience set a record-breaking hype, heating up the public offering investment fever, but it failed to maintain that momentum after listing. It appears that the sharp decline in enthusiasm after listing is not an issue unique to SK Bioscience.

As of 9:30 a.m. on the 22nd, SK Bioscience recorded 154,000 KRW, down 12,500 KRW (7.51%) from the previous day. On the first day of listing, it formed an opening price twice the public offering price and surged to the upper limit price, achieving a ‘ttasang’ (opening price doubled and hitting the upper limit), but then showed a downward trend for two consecutive days. On the 19th, it recorded a decline of around 1%, but on this day, it dropped sharply by more than 7%, falling short of pre-listing expectations.

The stock price seems to be dragged down by profit-taking after listing. In the two days following SK Bioscience’s listing, foreigners sold SK Bioscience shares worth 136.3 billion KRW, ranking second in net sales, and institutions also sold shares worth 43 billion KRW, placing them high on the net selling list.

Since the beginning of this year, public offerings have recorded high competition rates in demand forecasting and general subscription, and the heated enthusiasm before listing has repeatedly cooled down after listing. Among 21 newly listed stocks this year (excluding SPACs, including KONEX stocks that moved to KOSDAQ), the average return compared to the opening price (as of the closing price on the 19th) was -7.22%. Only seven stocks exceeded their opening price. All other stocks currently have prices below their opening price. Nano CMS, which was listed on the 9th, had an opening price of 33,000 KRW but fell below 20,000 KRW to 19,700 KRW on the 19th, a 40.4% drop from the opening price, showing the largest decline among rookie stocks. NBT (-37.76%), SoluM (-34.41%), and iQuest (-33.64%) also experienced significant declines.

The stock prices of stocks that recorded ‘ttasang’ are also sluggish. This year, five stocks recorded ‘ttasang’, but none of them showed positive returns compared to the closing price on the listing day. SK Bioscience turned bearish immediately after recording ‘ttasang’, falling below the closing price on the first day of listing. Oros Technology, Rainbow Robotics, Mobirix, and Seongjin Beauty Science also continued to weaken after hitting the upper limit price on the first day of listing, with their stock prices falling far short of the first day’s closing price.

In particular, considering that stocks listed this year recorded record-high competition rates, it clearly shows that the enthusiasm after listing has cooled significantly. SK Bioscience recorded a competition rate of 1,275.47 to 1 in demand forecasting for institutional investors, setting a new record for the highest competition rate in KOSPI history. Subscription deposits exceeded 63 trillion KRW, also breaking the record. Oros Technology recorded a general subscription competition rate of 1,033.82 to 1, and Rainbow Robotics recorded 1,201.26 to 1. Rainbow Robotics also set the highest competition rate in demand forecasting at 1,489.9 to 1. Mobirix and Seongjin Beauty Science recorded general subscription competition rates of 1,485.51 to 1 and 1,988 to 1, respectively.

Na Seungdu, a researcher at SK Securities, said, "Since February, the number of companies setting their public offering price above the upper limit of the desired price band has increased, creating an environment where post-listing returns are inevitably somewhat sluggish." He analyzed, "As the valuation levels of newly listed companies rise, the returns immediately after listing tend to slow down." Researcher Na added, "When strong liquidity supports the market, the possibility of overvaluation controversies always increases," and said, "It is a time to be a bit more cautious about investing in public offerings."