[Into the Stock] Socar Turns into a Retail Investor's Graveyard Just One Month After Listing... IPO Price Halved in Sight

Despite Demand Forecast Failure, IPO Proceeds
Institutional Selling Floods, Hitting Consecutive Lows

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Despite a disastrous demand forecast, Socar, which pushed ahead with its IPO, is continuously hitting new lows and heading downhill. The intensifying competition in the mobility industry, weak financial structure, and the continuous release of shares by institutional investors who are free from lock-up restrictions after the listing are all factors dragging down the stock price.

According to the Korea Exchange on the 22nd, as of 9:28 a.m., Socar was trading at 17,550 KRW on the KOSPI market, down 3.31% from the previous trading day. This is the lowest price since its listing. Socar entered the KOSPI market on July 22 with an IPO price of 28,000 KRW. After hitting a peak of 29,600 KRW during trading on August 23, the day after listing, the stock has been on a steady decline, falling below the 20,000 KRW mark on the 19th and continuously setting new lows every day. Before listing, Socar was recognized as a unicorn company with a valuation exceeding 1 trillion KRW, but its market capitalization dropped sharply to about 966 billion KRW immediately after listing and currently stands at 574.3 billion KRW, roughly half of that.

Socar’s poor performance was somewhat anticipated. The global interest rate hikes and recession concerns have created an unfavorable market environment for growth stocks like Socar, compounded by a failed demand forecast before listing. During the demand forecast targeting institutional investors, the subscription rate was about 56 to 1, and the IPO price was lowered to 28,000 KRW, far below the expected range of 34,000 KRW to 45,000 KRW. The general subscription rate was also at a recent low of 14.4 to 1.

Reflecting this atmosphere, the shares allocated to institutional investors have been continuously released into the market since the listing, pushing the stock price down. At the time of the IPO, Socar allocated 2.44 million shares, equivalent to 67.1% of the total tradable shares, to institutional investors. Of these, 260,000 shares were allocated to foreign institutional investors, and 2.18 million shares were allocated to domestic institutional investors, about 2 million of which are free from lock-up restrictions. Institutional investors have been steadily selling these shares this month, contributing to the ongoing price decline.

Moreover, as Socar marks its one-month anniversary of listing today, 1,974,524 shares will be released from lock-up, raising concerns about further stock price declines. This amount corresponds to 41.58% of the currently traded shares.

Intensifying competition in the mobility industry and a fragile financial structure are also risk factors. Lee Kyung-eun, a researcher at KB Securities, pointed out, "Although Socar is a dominant company with a 79.6% market share in the domestic market, if competition within the mobility platform market intensifies, there is a risk of market share decline and consequent profitability deterioration."

However, some believe that if Socar diversifies its revenue sources and confirms profitability in the second half of this year, there could be potential for stock price appreciation.

Han Seung-han, a researcher at SK Securities, said, "Socar is the only domestic and international mobility platform company expected to turn an operating profit this year. If profitability improves due to top-line growth in the car-sharing segment and cost reductions through data utilization in the second half of this year, there is sufficient potential for future stock price increases."