"'IPO Giant' Hyundai Engineering Withdraws Listing: Hidden Intentions... Timing of Rechallenge Undecided"

[Asia Economy Reporter Lee Seon-ae] Hyundai Engineering, which had been spotlighted as a major player in this year's initial public offering (IPO) market, has abruptly withdrawn its listing, drawing attention to the reasons behind the decision. The company cited the recent stock market crash and the difficulty in receiving a proper valuation as reasons, but the underlying factors appear to be somewhat complex. While they plan to make another attempt, the schedule remains undecided.

On the 28th, Hyundai Engineering announced the suspension of its IPO through a withdrawal report. Hyundai Engineering stated, "After discussions with the joint lead managers and others, we canceled the remaining schedule and submitted the withdrawal report," adding, "We considered various conditions, including the difficulty in receiving an appropriate valuation of the company." They further explained, "No shares were allocated to institutional investors who participated in the demand forecast, and since subscriptions had not yet been made to general investors, there is no issue regarding investor protection."

From the 25th until that day, the demand forecast targeting domestic and foreign institutional investors reportedly showed a final demand forecast competition rate below 50 to 1. This is lower than Krafton's 243 to 1, which recorded the lowest demand forecast competition rate among major IPOs last year. Consequently, the public offering price, even at the lower end of the desired range of 57,900 KRW, became precarious, leading to the decision to withdraw.

An investment banking industry insider said, "On the first day of the demand forecast on the 25th, some institutions proposed the upper limit of the offering price, but most canceled their participation the next day," adding, "The sharp drop of the KOSPI index to the 2600 level caused significant market turmoil, and the investment sentiment toward the construction industry was at its worst, which added considerable pressure."

Investor sentiment toward construction stocks was also poor. This followed the collapse accident on the 11th at the Gwangju Hwajeong I-Park new apartment construction site by HDC Hyundai Development Company.

While the challenging market conditions both inside and outside the industry had an impact, there is also a view that the controversy over overvaluation influenced the decision. Hyundai Engineering's market capitalization, even based on the lower end of the offering price, reached 4.6293 trillion KRW, surpassing its parent company Hyundai Construction (4.46 trillion KRW) and competitor Samsung Engineering (4.2 trillion KRW), which affected institutional investors' decisions.

There was also skepticism regarding the high proportion of existing share sales. Hyundai Engineering planned to raise 926.4 billion KRW through the sale of 12 million existing shares (75%) and 4 million new shares (25%). Based on the lower end of the offering price, the funds flowing into the company would be only 231.6 billion KRW, while the remaining approximately 700 billion KRW would go to Hyundai Motor Chairman Chung Eui-sun (309.3 billion KRW), Honorary Chairman Chung Mong-koo (82.3 billion KRW), Hyundai Glovis (116.6 billion KRW), and Kia and Hyundai Mobis (each 93.3 billion KRW).

An investment banking industry insider said, "There is a perception that a high proportion of existing share sales benefits the current shareholders," adding, "The structure of the offering also seems to have been a hindrance."

Hyundai Engineering plans to proceed with the schedule again at an appropriate time once the atmosphere regarding the domestic stock market and investment sentiment in the construction sector improves. A Hyundai Engineering representative said, "The offering schedule is undecided, and we will proceed again when conditions allow for a proper valuation."

Meanwhile, with this withdrawal, the sale of existing shares by special related parties, including Chairman Chung Eui-sun, has also been postponed. Chairman Chung and Honorary Chairman Chung Mong-koo had planned to raise up to 500 billion KRW by selling their holdings during the listing process.