[IPO Underwriting Competition] Polarization Persists Despite Peak Boom④

The year 2021 marks the biggest boom in the initial public offering (IPO) market ever. This year, 62 companies entered the stock market, with the total annual public offering amount exceeding 17 trillion won. Securities firms earned fees worth several hundred billion won solely from underwriting, acquisition, and subscription processes of IPOs. The profits generated from the influx of funds into the public offering market are also enormous. Consequently, the competition among securities firms for underwriting has become fierce. Even after Chuseok, a series of IPOs are scheduled, and the rankings of IPO underwriters are becoming clear.

[Asia Economy Reporter Lim Jeong-su] Despite the record-high public offering volume, the polarization of IPO underwriting performance between large securities firms and small-to-medium-sized securities firms has not been resolved. Small-to-medium-sized securities firms had to be content with participating as part of the underwriting consortium for public offering shares or being selected as small-scale underwriters for some IPOs.

According to the investment banking (IB) industry on the 22nd, as of September this year, the top five mega IBs with equity capital exceeding 4 trillion won and three foreign securities firms have a total IPO underwriting performance of 16 trillion won, accounting for 94% of the total annual public offering amount of 17.065 trillion won. Only 6% of the underwriting performance by public offering amount went to small-to-medium-sized securities firms.

Among small-to-medium-sized firms, the most notable securities firms in terms of performance are Daishin Securities and Hana Financial Investment. Daishin Securities has achieved solid results in the IPO market in recent years. It was named as a joint underwriter for the KOSPI listing of D&D Platform REITs and played the role of underwriter or joint underwriter for companies such as VigenCell, HPO, SamCNS, CNC International, BioDine, Jeju Beer, Rainbow Robotics, and Finger.

Hana Financial Investment, which entered the mega IB category by surpassing 4 trillion won in equity capital, also took on joint underwriting for the KOSPI listings of Hyundai Heavy Industries and SoluM. It successfully brought companies like Kukon, ADM Korea, and Maxst into the KOSDAQ market. Except for Daishin Securities and Hana Financial Investment, other small-to-medium-sized firms did not significantly increase their underwriting performance compared to previous years, with underwriting amounts below 100 billion won.

Small-to-medium-sized securities firms that fell behind in the underwriting competition mainly participated as part of the underwriting consortium for public offering shares to boost their profits. IPO public offering share acquisition fees, including performance incentives, are generally around 0.8-1% of the acquisition amount. Acquiring about 100 billion won worth of public offering shares results in approximately 1 billion won in acquisition fees. After full acquisition, subscriptions are mainly conducted targeting individual investors, and subscription fees are also partially earned.

An IB industry insider said, "It is not easy for small-to-medium-sized firms without an IPO track record and lacking manpower to secure underwriting positions against large firms," adding, "This year, especially with many large IPOs exceeding 1 trillion won in public offering amount, the gap in IPO underwriting performance between large and small-to-medium-sized firms has widened even further."