[IPO Underwriting Competition] LG Energy and Kakao Pay, Year-End Ranking's Biggest Variable⑤

The year 2021 marks the biggest boom in the initial public offering (IPO) market ever. This year, 62 companies have entered the stock market, with the total annual public offering amount exceeding 17 trillion won. The fee income earned by securities firms from underwriting, acquisition, and subscription processes of IPOs alone amounts to several hundred billion won. The profits generated from the funds flocking into the public offering market are also enormous. Consequently, the competition among securities firms for underwriting is fiercely intense. With a series of IPOs scheduled after Chuseok, the IPO underwriting rankings are also beginning to take shape.

[Asia Economy Reporter Lim Jeong-su] Attention is focused on whether there will be changes in the IPO underwriting rankings in the fourth quarter. Depending on the success and corporate value of the mega IPOs scheduled for the fourth quarter, such as LG Energy Solution and Kakao Pay, it is not possible to rule out changes in the underwriting rankings before Chuseok.

According to the investment banking (IB) industry on the 22nd, companies planning IPOs within the year after the Chuseok holiday include LG Energy Solution, Kakao Pay, K Car, and Simone Accessory Collection. The combined market capitalization of these four companies is expected to exceed 100 trillion won. There are also forecasts that LG Energy Solution, considered the biggest IPO this year, could reach a corporate value of up to 100 trillion won.

The public offering structure of LG Energy Solution has not yet been detailed. Assuming a corporate value of 70 trillion to 100 trillion won, if about 20% of the total is offered to the market, the public offering volume would approach 14 trillion to 20 trillion won. Depending on how KB Securities and Morgan Stanley Securities, the underwriters, divide the underwriting amount, there is a high possibility of changes in the IPO underwriting rankings.

However, it is uncertain whether LG Energy Solution will successfully list within the year. Last month, GM announced an additional recall of 73,000 Chevrolet Bolt electric vehicles equipped with LG batteries. Due to battery issues, LG Electronics and LG Energy Solution set aside 326.5 billion won in recall provisions, but uncertainties remain large regarding compensation to GM.

The listing schedule and corporate value of Kakao Pay, scheduled for mid-next month, are also inevitably subject to delay or adjustment. As the government has launched strong regulations against platform companies including Kakao, questions have been raised about Kakao Pay’s growth potential, and the possibility of postponing the listing schedule has emerged. Currently, Samsung Securities, JP Morgan, and Goldman Sachs are in charge of underwriting the listing.

An IB industry official said, "Depending on the success of the heavyweight IPOs in the fourth quarter, there may be a reshuffling of the public offering underwriting rankings this year," adding, "In particular, the successful listing of LG Energy Solution is highly likely to cause a significant shift in the underwriting rankings."