Shinyoung Securities Report
Increase in SPAC Mergers Leading to SPAC Merger Listings
Cases of Reattempting Listings by Lowering IPO Prices
On the 21st, when the KOSPI index started with a slight rise, dealers were working in the Hana Bank dealing room in Euljiro, Seoul. Photo by Mun Ho-nam munonam@
[Asia Economy Reporter Myunghwan Lee] The corporate initial public offering (IPO) market in the second half of the year is expected to show a different atmosphere from the frozen first half, according to securities industry forecasts.
Shinyoung Securities analyzed on the 2nd, "In the second half, the number of companies filing preliminary reviews for mergers with Special Purpose Acquisition Companies (SPACs) is increasing, and there are cases of companies lowering their offering prices to reattempt IPOs."
Shinyoung Securities pointed out that in the first half of this year, due to the Russia-Ukraine war, global monetary tightening, and recession concerns, the stock market atmosphere was sluggish, leading many companies to postpone or withdraw their IPO plans. This was because the liquidity environment deteriorated, making it difficult to receive high valuations for companies. After Hyundai Engineering disclosed the withdrawal of its offering due to difficulties in company valuation in the first half of this year, major IPO companies such as SK Shieldus and One Store all withdrew their intentions to list.
Despite the contraction of the IPO market, SPAC merger listings have significantly increased. The Korea Exchange has allowed the 'SPAC extinction merger' method since February, where the SPAC is dissolved and the company remains as the surviving entity, and since then, the number of SPACs applying for preliminary listing reviews has increased. By merging through the SPAC extinction merger method, the company becomes the surviving entity, avoiding the extinction of corporate personality and business history. Until now, it was practically impossible to list SPACs because venture capital (VC)-operated funds had to be dissolved, but with the SPAC extinction merger method, listing has become possible, and market activation is expected.
Among companies that had withdrawn their listings, many are reattempting IPOs by significantly lowering their desired offering prices. When reattempting listing, companies often lower the desired offering price and the number of shares offered, and company valuations are also adjusted downward compared to before. Nevertheless, Shinyoung Securities explained that these companies judged that completing the listing within the year is important. Daemyung Energy lowered its desired offering price from the previous 25,000?29,000 KRW to 15,000?18,000 KRW. The actual offering price was fixed at 15,000 KRW, and the listing procedure was completed on the 16th of last month.
As a major IPO in the second half, Shinyoung Securities presented Hyundai Oilbank, which is attempting its third IPO. Hyundai Oilbank passed the Korea Exchange's preliminary review for new listing on the 29th of last month. Shinyoung Securities estimated that Hyundai Oilbank decided to complete its IPO within this year because the recent Ukraine crisis caused international oil prices to surge, leading to a super boom in the refining industry.
Researcher Soyeon Park of Shinyoung Securities said, "Although the market environment is still challenging, unlike the first half, the second half will see an increase in listing events, expanding investment diversity," but also analyzed, "In cases where large IPOs like LG Energy Solution in the first half and Hyundai Oilbank proceed, there can be negative impacts on the secondary market due to liquidity concentration, so monitoring is necessary."
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