[Practical Finance] IPO 'Ttasang' Big Win or Possible Bust

Some Stocks Are Priced Below the Offering Price... Duplicate Subscription Also Restricted

[Asia Economy Reporter Minwoo Lee] Since last year, abundant liquidity has poured into the stock market, causing the initial public offering (IPO) market to swell as well. However, concerns have arisen and the hype seems to be slowing down after SK Innovation Technology (SKIET) failed to achieve a 'ttasang' (opening price doubling the IPO price followed by hitting the upper price limit). Given that multiple subscription accounts across various securities firms have been restricted, there are calls for more cautious investment.

According to the Korea Exchange as of 11 a.m. on the 23rd, SKIET's stock price rose 3.77% from the previous day to 165,000 KRW. Although it still exceeds the IPO price of 105,000 KRW, it falls far short of the highest price of 222,500 KRW recorded on the first day of listing last month on the 11th. This is a modest result compared to the intense enthusiasm that set a record for the largest subscription deposit (approximately 81 trillion KRW). With SKIET's failure to achieve 'ttasang' on its first day, all small and mid-cap stocks listed around the same time also performed poorly. HPIO and CNC International, which were listed on the 14th and 17th of the same month respectively, had opening prices below their IPO prices on their listing days. As of the closing price on the 21st, HPIO still has not surpassed its IPO price.

Therefore, although various 'big fish' are waiting in the IPO market in the second half of the year, experts warn against recklessly rushing in with the sole aim of hitting a 'ttasang' jackpot. Especially, the upcoming restriction on multiple subscriptions is a significant variable. The Financial Services Commission recently completed the re-legislation notice for the amendment to the Capital Markets Act Enforcement Decree, which prohibits multiple subscriptions for public offerings. Accordingly, from the 20th of this month, individual investors can only subscribe to public offerings through one account per person. Unlike before, it is no longer possible to hastily open multiple securities accounts to increase the chances of winning.

Within the industry, the ban on multiple subscriptions is considered the biggest variable for general public offerings in the second half of the year. This is because the number of subscription applications and competition rates may decrease, naturally lowering interest. Companies undergoing listing procedures must submit their securities registration statements before the enforcement date of the amended Capital Markets Act Enforcement Decree on the 20th to allow multiple subscriptions.

The biggest IPO of this year, 'Krafton,' caught the last train for multiple subscriptions. Krafton, the developer of the globally popular first-person shooter (FPS) game 'Battlegrounds,' passed the preliminary review for listing on the KOSPI market on the 11th. Subsequently, it submitted its securities registration statement on the 16th, enabling multiple subscriptions. Kakao Bank and Kakao Pay, which submitted their preliminary review requests to the Korea Exchange on April 15th and 26th respectively, were unable to submit their securities registration statements before the 20th, making multiple subscriptions impossible.

However, since small investors can now more easily secure at least one share through equal allocation, it is still seen as an important investment opportunity. The Research Center at Daishin Securities estimated that the expected return rate relative to the principal from public offering investments over the past five years since 2017 is approximately 0.11?0.13% per transaction. Considering that the annual average number of public offerings is around 130, investing in 40 public offerings annually would yield an expected return of 4.5%, and investing in 60 public offerings annually would yield about 6.8%. The Daishin Securities Research Center emphasized, "Before investing in public offerings, it is essential to carefully check the stock price trends of related industries, the liquidity environment related to IPOs, and the investment sentiment of institutional investors during demand forecasting."

They also advised considering the timing and flow of the stock market since the IPO market is also influenced by the stock market. The Daishin Securities Research Center explained, "Domestic public offering performance showed a trend lagging 3 to 6 months behind the KOSDAQ index, which accounts for a high proportion within IPOs. Additionally, public offering investment performance tends to be better in the second quarter and relatively weaker at the end and beginning of the year." They added, "With the abundant liquidity and improved stock market returns last year, capital inflow into the IPO market increased significantly, and there is sufficient standby capital in the stock market, so interest in the IPO market is expected to continue in the second half of the year."