[Desk Column] Even with Money and Information...

[Asia Economy Reporter Jeon Pil-su] More than 114 trillion won, the largest amount ever, poured into the LG Energy Solution IPO. This figure surpasses the previous record by over 30 trillion won. The number of individual investors participating in the subscription exceeded 4.42 million. It’s not just LG Energy Solution. It is common for mega IPOs to attract tens of trillions of won, with several million people participating in the subscription as a basic standard.

The foundation for millions of subscriptions is the expanded base of investors. The number of stock accounts exceeds 55 million, which is more than the entire population of South Korea. Nearly 20 million accounts were added in one year. It is said that the number of investors increased by about 10 million over two years. The age range of investors has expanded from people in their 40s and 50s to those in their 20s and 30s, and even minors.

The reason why everyone rushes to subscribe is the expectation that they can earn money stably. Although it remains to be seen, if the stock hits ‘ttasang’ (a 100% increase from the IPO price followed by the daily upper limit), theoretically, the principal becomes 260%. There is also analysis suggesting that ‘ttasang’ is possible when compared to overseas competitors. If LG Energy Solution achieves ‘ttasang,’ its market capitalization would reach 182 trillion won, twice that of SK Hynix (91.3 trillion won), the second-largest stock in the Korean stock market.

IPO stocks generally provide relatively stable returns compared to other risky assets. However, competition is so fierce that it is difficult to earn meaningful profits without investing a substantial amount. In the case of LG Energy Solution, it is said that you need to invest 100 million won to receive about 7 shares. Since the IPO price is 300,000 won, this means receiving shares worth 2.1 million won. If the stock hits ‘ttasang’ as expected and the principal becomes 260%, the profit would be 3.36 million won (excluding fees).

Calculating a return of about 3% in just over ten days is not bad. During the LG Energy Solution subscription period, more than 6 trillion won was withdrawn as overdraft loans from the five major banks alone. Including loans secured by deposits and insurance policy loans, over 10 trillion won was loaned out. Investors who were confident that LG Energy Solution would instantly become a company with a market capitalization exceeding 180 trillion won took so-called ‘youngkkeun (borrowing to the limit)’ loans.

However, there is no such thing as 100% in the world of investment. Depending on market conditions, some stocks fall below the IPO price. Of course, stocks with competition rates of hundreds to one usually surge on the first day of listing. Even if they don’t reach ‘ttasang,’ it is not uncommon to earn tens of percent in profit. Because of this, new investors tend to underestimate the market. They may pursue high returns without risk management.

Even experienced investors sometimes fall into the misconception that having more money or faster information will lead to greater profits. They think that their failure to make money is because they are crowded out by forces (?) with more money and information.

However, money and information are necessary conditions for investment success, but not sufficient conditions. Mr. Lee, who embezzled more than 220 billion won and set a new record for embezzlement in a listed company, invested hundreds of billions of won in Dongjin Semichem and NCSoft. Looking at the timing of his investments in these two stocks, it was before major positive news emerged, but Mr. Lee suffered losses of hundreds of billions of won. Both stocks rose after he ‘cut losses’ and exited.

Some say that stock trading is an art of ‘timing,’ emphasizing the importance of buying and selling timing. This seems partly true. The problem is that accurately hitting the highs and lows of stocks is beyond human capability. Dongjin Semichem is a stock that rose tenfold last year riding the semiconductor boom.

“Stocks are not about ‘timing’ but about buying ‘time.’” This is a stock market adage that investors heated up by the IPO frenzy should remember once again.