[Beginner's Guide to Stock Investing] Ttassang vs Sangjang Cheolhoe... Temperature Differences in the IPO Market

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[Asia Economy Reporter Kwon Jaehee] Since the second half of last year, major companies like Market Kurly have consecutively withdrawn their IPOs.

Even this year, Oasis, once considered a promising candidate in the IPO (Initial Public Offering) market, decided to withdraw its IPO.

On the other hand, news of small and mid-cap stocks consecutively achieving 'Ttah-sang' (forming an opening price at double the IPO price and then hitting the upper price limit) has been heard.

The IPO market is swinging between cold and hot.

Let's take a look at what an IPO is and what the current atmosphere of the IPO market is like.

What is an IPO?

First, let's clarify the concept of an IPO.

For unlisted companies to be traded on securities markets such as KOSPI or KOSDAQ, they must go through the process of going public.

This process of going public is called a IPO (Initial Public Offering).

It means that a company discloses its shares and business performance so that external investors can purchase its stock.

In other words, it is the process of registering to enter the KOSPI or KOSDAQ market.

So, why do companies conduct IPOs?

Because it is easier to raise external funds.

Companies need continuous investment to grow.

They might borrow from banks or issue bonds to raise investment funds.

However, the best way is to directly raise funds by issuing stocks.

This way, they don't have to pay interest like borrowing from banks, and since it is not debt, there is no cost burden.

Then, is IPO only good for companies?

No. It is also good for investors.

Because investors can directly invest in high-growth companies.

Of course, buying on the over-the-counter market is possible, but taxes are higher, and in the OTC market, popular companies are traded at prices as high as sellers ask, which means higher risk.

So, what process does an IPO go through?

First, an unlisted company applies for listing at the Korea Exchange.

If it meets the screening criteria, it gets approval, and the company begins the IPO procedures.

Then, together with the underwriter (securities company) assisting the IPO, the company prepares a securities registration statement.

The securities registration statement contains important information such as the method of public offering, how the offering price is determined, the purpose of the IPO, financial statements, and shareholder status.

Investors who invest in newly listed companies are strongly advised to read it.

After submitting the securities registration statement, a demand forecast is conducted targeting institutional investors.

Usually, if the demand forecast by institutional investors is successful, the public subscription by general investors often sees high competition rates.

Therefore, the demand forecast is often regarded as a barometer to gauge market sentiment before the main subscription.

After the demand forecast ends, the offering price is decided, and a public subscription for general investors is held over two days.

If the underwriters are Samsung Securities, Hana Securities, or NH Investment & Securities, remember that you must have accounts with these securities companies to subscribe.

New Stocks' 'Ttah-sang' Sparks Optimism in IPO Market?

Last month, 'Mirae Semiconductor' entered the KOSDAQ market and closed at the upper price limit on its first day of listing.

Mirae Semiconductor's IPO price was 6,000 KRW, the opening price was formed at double the IPO price at 12,000 KRW, then it hit the upper limit and closed at 15,600 KRW.

It truly recorded a 'Ttah-sang'.

Hanjoo Light Metal and TMC also rose for four consecutive trading days after entering the KOSDAQ market.

Hanjoo Light Metal also heated up the atmosphere by hitting the upper limit on its first day of listing.

With new stocks consecutively recording 'Ttah-sang', expectations are rising that a fresh breeze might be blowing in the IPO market after a long time.

Major IPO Withdrawals One After Another

However, complacency is dangerous.

With major companies withdrawing their IPOs, it is difficult to say that spring has come to the IPO market yet.

A representative company that withdrew its IPO this year is Oasis.

Oasis submitted a withdrawal report on the 13th.

The reason behind Oasis's IPO withdrawal was its crushing defeat in the demand forecast targeting institutional investors.

Oasis proposed a desired IPO price range of 30,500 KRW to 39,500 KRW, but most institutional investors placed orders below 20,000 KRW.

With Oasis, once considered a promising candidate, also failing in the demand forecast, it is expected that the IPO market will remain cold for a while.

Major companies expected to go public this year include Kakao Entertainment, CJ Olive Young, and Doosan Robotics.

Some expect that if the government's IPO market soundness enhancement measures announced at the end of last year are implemented, the market atmosphere will change.

Researcher Oh Kwangyoung of Shin Young Securities said, "There is a high possibility that companies attracting investors' interest this year will go public, and if the government's IPO soundness enhancement measures are implemented in the second half, the atmosphere will change. The IPO market will be more active in the second half than in the first half."

Dear Joorini,

If a company you have been watching enters the stock market through an IPO, I recommend you try subscribing to the public offering at least once.

Please be sure to read the securities registration statement before subscribing.

There will be much to learn by observing how a growing company enters the securities market and how the offering price is formed.

In doing so, you will develop the insight to identify promising companies like finding pearls in the mud.

It would be even better if you can follow it up with a 'Ttah-sang'.

Even if the company you subscribed to does not record a Ttah-sang, I firmly believe you will gain invaluable experience as an investor that surpasses Ttah-sang through this process.

Today, I end this article wishing wise investments for all Joorini.

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This article is from [Joorini Guide], published weekly by Asia Economy. It explains stock-related financial news and difficult economic stories in an easy and friendly way so that stock beginners can understand. By subscribing, you can receive articles for free.

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