Historic IPO Coming Next Year... The Invasion of 'New Money'

KOSPI Index Ends Up 0.98% Since Early Year
Major IPOs Boost KOSPI Market Cap by 8.31%
LG Energy Solution and Others Line Up for IPOs Targeting 80 Trillion KRW Valuation
Domestic Stock Market Eyes 2,900 Trillion KRW Market Cap... Concerns Over Supply Pressure Remain

[Asia Economy Reporter Ji Yeon-jin] Although the domestic stock market remained stagnant this year, it has significantly expanded in size due to a series of major initial public offerings (IPOs). With mega IPOs lined up for next year, including LG Energy Solution, which is valued close to 100 trillion won, the scale of the domestic stock market is expected to grow even further.

According to the Korea Exchange on the 7th, as of the previous day's closing price, the KOSPI rose only 0.98% compared to the beginning of the year. During the same period, the KOSDAQ index recorded a 1.46% increase. However, the market capitalization of KOSPI increased by 8.31%, and that of KOSDAQ grew by as much as 10.58%.

This was thanks to the large-scale IPOs driven by the public offering investment boom that started last year. KakaoBank, which entered the KOSPI in August, secured the 11th place in market capitalization rankings with a valuation of 31 trillion won. In addition, KakaoPay (26 trillion won), Krafton (23 trillion won), SK Bioscience (18 trillion won), and SK IE Technology (11 trillion won) all surpassed 10 trillion won in market capitalization. As of the previous day this year, 103 new listings have been made on KOSPI and KOSDAQ, breaking the all-time record of 101 listings set in 2019.

One analysis suggests that the sluggish index performance in the domestic stock market this year is due to investors’ funds being concentrated on large-scale new listings. Kim Seung-hyun, a researcher at Yuanta Securities, pointed out, "As large-scale IPOs proceed, existing stocks have become targets for selling to respond to these new stocks," adding, "It is an environment where funds invested in existing stocks (Old Money) inevitably become sidelined."

The IPO market is expected to be record-breaking again next year. Mega IPOs aiming for market capitalizations of 10 trillion won include LG Energy Solution, the world's second-largest electric vehicle battery manufacturer, as well as Hyundai Engineering, Hyundai Oilbank, and SSG.com. LG Energy Solution, which was spun off from LG Chem, passed the preliminary listing review on the 30th of last month and is expected to be listed in January next year. Its market capitalization based on the public offering price is reported to be between 10.9 trillion and 12.7 trillion won. However, since the market capitalization of CATL, the global No. 1 Chinese battery company, reaches about 290 trillion won, LG Energy Solution’s corporate value is expected to reach the 80 trillion won range.

This would place it in the 2nd or 3rd position in the KOSPI market capitalization rankings immediately after listing, following Samsung Electronics (approximately 455 trillion won). This is comparable to the combined first-day market capitalizations of the top three IPOs in history (KakaoBank 33 trillion won, KakaoPay 25 trillion won, Krafton 22 trillion won).

According to Korea Investment & Securities, the number of companies expected to have a market capitalization of over 1 trillion won at new listings next year is 13, surpassing this year’s 11. Notably, five companies are aiming for a market capitalization exceeding 10 trillion won. As of the previous day, the combined market capitalization of KOSPI and KOSDAQ was 2,627.6166 trillion won, an 11.5% increase since the beginning of the year. If this trend continues with mega IPOs next year, the domestic stock market size could reach 2,900 trillion won.

However, there are concerns that the new listings of large-scale stocks could increase the supply burden on the domestic stock market. Researcher Kim said, "When LG Energy Solution is listed, the scale of selling of existing stocks to respond to it must also increase," adding, "An uncomfortable situation for shareholders of existing stocks is inevitable."