Among 13 IPO Companies Last Year, Only 'K Car' Stock Price Rose

Krafton, Lotte Rental, Hancom Lifecare Stock Prices Fall Below IPO Price
Value Decline Inevitable for This Year's New IPO Companies

[Asia Economy Reporter Hwang Yoon-joo] Among the 13 companies newly listed on the KOSPI market last year, the stock prices (based on closing prices) of 12 companies declined after their listings. Since most of the IPO companies were growth stocks, the stock prices showed weakness due to valuation adjustments ahead of interest rate hikes. This is expected to affect the offering prices of companies scheduled for IPOs this year as well.

According to the Korea Exchange on the 16th, among the 13 newly listed domestic KOSPI stocks in 2021 (excluding transfers and REITs), all except K Car saw their stock prices fall after listing. The stock price decline rates were △Krafton 38.8% (344,000 KRW·first day closing price → 277,500 KRW·closing price on the 15th) △Kakao Pay 28.4% (193,000 KRW → 138,000 KRW) △SK Bioscience 19.5% (169,000 KRW → 136,000 KRW) △Hyundai Heavy Industries 1.7% (111,500 KRW → 109,500 KRW) △SK IET -31.7% (154,500 KRW → 105,500 KRW) △SD Biosensor 5.7% (61,000 KRW → 57,500 KRW) △Kakao Bank 24.7% (69,800 KRW → 52,500 KRW) △Lotte Rental 29.7% (55,500 KRW → 39,000 KRW) △Iljin Hysolus 58.9% (89,100 KRW → 36,600 KRW) △SoluM 18.5% (29,150 KRW → 23,750 KRW) △Aju Steel 53.8% (33,500 KRW → 15,450 KRW) △Hancom Lifecare 47.6% (12,800 KRW → 6,700 KRW). Only K Car rose by 22.1% (23,000 KRW → 28,100 KRW).

There were also three companies whose stock prices fell below their IPO prices. The closing prices of Krafton, Lotte Rental, and Hancom Lifecare were down 44.2% (498,000 KRW·IPO price), 33.8% (59,000 KRW), and 51% (13,700 KRW) respectively compared to their IPO prices.

Experts cite "interest rates" as the reason why last year’s IPO companies’ stock prices struggled. Last year, the Bank of Korea’s base interest rate rose from 0.50% (July) to 0.75% (August), and then to 1.00% (November). This year, the base rate was raised to 1.25% (January), and there are high expectations for an additional hike in April.

Most companies listed last year were growth stocks sensitive to interest rate hikes. The New Growth Industry Analysis Team at SK Securities explained, "Growth stocks are companies expected to have larger cash flows 5 to 10 years from now," adding, "The stock price of a growth stock is the present value of future cash flows discounted at an appropriate interest rate. When interest rates rise, the discount rate increases, which negatively affects stock prices."

This atmosphere is expected to impact companies planning IPOs this year. A representative from Shinhan Investment Corp. said, "The market sentiment is different from last year, as seen in Market Kurly postponing its IPO scheduled for the first half," adding, "Market liquidity is shrinking compared to last year, and the stock prices of comparable companies used for valuation are also falling, so there is a high possibility that valuations will be lower than expected."