Stock Market Slump Triggers 'IPO Tragedy'... Numerous New Stocks Halved in Value

Number of Listed Companies Down from 91 to 70, IPO Amount Falls from 20 Trillion to 16 Trillion
13 Companies Withdrew Listings... IPO Winter Expected Next Year as Well

[Asia Economy Reporter Lee Seon-ae] The year-end scene of this year's initial public offering (IPO) market, which opened brilliantly with the appearance of LG Energy Solution, a 'record-breaking big fish,' is extremely disappointing. It is truly a case of 'a strong start but a weak finish.' Compared to the booming market last year, the market size has shrunk drastically. Due to continued sluggishness in the stock market and controversies over overvaluation of the offering price, the number of companies postponing or withdrawing their listings has significantly increased. Newly debuted stocks on the stock market suffered the humiliation of trading below their offering prices.

According to the Korea Exchange on the 22nd, a total of 70 companies (excluding SPACs and previous listings), including BioNote entering the market on this day, were listed this year. Compared to 91 companies last year, this is a 23% decrease. The total amount raised through public offerings also dropped by 21.2% from last year's 20.38 trillion won to just 16.0748 trillion won. Excluding the funds raised by LG Energy Solution (12.75 trillion won), which set the most spectacular record in IPO market history, the amount is only 3.3248 trillion won. This is 36.2% less than the 5.215 trillion won recorded in 2020. There were only five large-scale IPOs with a public offering amount exceeding 100 billion won.

Only 5 Large-Scale IPOs Exceeding 100 Billion Won in Offering Amount

Although the IPO market was expected to continue its boom with LG Energy Solution's entry into the stock market, the market quickly froze due to ongoing stock market stagnation. Companies failed to receive proper recognition of their corporate value, and controversies over offering price bubbles led to a surge in IPO postponements or withdrawals. Starting with Hyundai Engineering, Hyundai Oilbank, SK Shieldus, One Store, BioInfra, and Jaram Technology consecutively withdrew their listings. Golfzon Commerce, CJ Olive Young, Taelim Paper, K Bank, Lionheart Studio, Millie's Library, and J.O postponed their listings. The number of companies withdrawing from IPOs this year is expected to reach 13, setting a record high.

Yoo Jin-hyung, a researcher at DB Financial Investment, explained, "This year, the number of companies entering the stock market has significantly decreased as many companies withdrew their listings. Excluding LG Energy Solution, the total amount raised is even lower than the pre-COVID-19 level."

The humiliation of a 'half-price listing' also appeared. BioNote is the unfortunate protagonist. After failing to attract institutional demand forecasts, the offering price was set at 9,000 won, half of the lowest end of the expected range (18,000 to 22,000 won). Initially, the expected market capitalization based on the upper limit of the offering price band was expected to exceed 2.2 trillion won, but the finalized offering price falls short of 1 trillion won.

Many companies also failed to receive their fair value. Numerous companies were listed at prices below the lower end of their expected offering price bands. According to Daishin Securities, as of the fourth quarter, the proportion of IPO companies listed below the lower end of the offering price band was 50.0%, the highest in the past five years.

The fate of newly debuted stocks on the stock market was also miserable. Excluding BioNote, the average return of 69 listed stocks after listing (based on closing price on the 16th) was only 5.9%. Forty-six stocks (65.71%) closed below their offering price (adjusted for free stock issues) on the 16th. Many newly listed stocks fell to less than 50% of their offering price, including Winia Aid, Razor Cell, Narae Nanotech, and VC.

Choi Yoo-jun, a researcher at Shinhan Investment Corp., diagnosed, "Many newly listed stocks this year underperformed compared to the KOSPI and lost investor interest. The stock market needs to enter a stabilization phase to find a turnaround opportunity." He added, "In the recovery phase of stock prices, the strength of the rebound will depend on whether the industry recovery leads to earnings growth and whether the business model aligns with major themes."

December is usually considered the peak season for IPOs, but this year, including SAMG Entertainment and BioNote, only two companies have entered the market. The downturn is likely to continue next year. Currently, only three companies?TMC, Hanju Light Metal (formerly Hanju Metal), and Obzen?are conducting demand forecasts targeting institutional investors. This is a stark contrast to January this year, when 10 companies, including LG Energy Solution, K Auction, and ASEMS, crowded the market.

Park Sera, a researcher at Daishin Securities, said, "Typically, the number of listed companies is low in January. Moreover, there is no large-scale IPO company comparable to LG Energy Solution, which raised 12.75 trillion won at the beginning of this year, so the IPO market is expected to remain sluggish in January next year."

The harsh winter of the IPO market is expected to continue until the first half of next year. Interest rate hikes are still ongoing, and many institutional investors are unable to recover their investments due to stock price declines of companies listed this year, making it difficult for the market to regain vitality. The fear of economic recession is also intensifying, leading to an even more challenging fundraising environment. Researcher Yoo predicted, "The IPO market downturn will continue until the first half of next year. It will be difficult to proceed with medium to large-scale IPOs with offering amounts exceeding 40 billion won without lowering expectations for the offering price band."