[IPO Restructuring 2 Months]③ Pado·Nexteel Poor Performance... Cloudy Outlook for Second Half IPO Market?

Formation of IPO Market Centered on Small and Mid-Cap Stocks in the First Half of This Year
Attention on Blockbuster Success of Doosan Robotics and SGI Seoul Guarantee Insurance

Following Pado, which was listed this year with a market capitalization exceeding 1 trillion won, Nexteel, the first stock listed on the KOSPI market, also recorded a performance below its initial public offering (IPO) price on the first day. Although there were high expectations that large-scale companies worth trillions of won would emerge in the second half of the year and invigorate the IPO market, concerns about poor market reception have grown due to the sluggish performance of the initial players. In the first half of the year, only small and mid-cap stocks succeeded in attracting attention in the IPO market.

The stock price of Pado, which was listed on the 7th, closed at 27,600 won, down 10.97% from the IPO price of 31,000 won on the first day. Considering that the stock price could have risen up to four times the IPO price on the first day, this is a disappointing return. Pado's stock price only surpassed the IPO price based on the closing price after six trading days since listing. Nexteel, which attracted attention as the first KOSPI-listed stock of the year, also closed at 10,740 won on its first trading day on the 21st, 6.61% lower than the IPO price of 11,500 won. During the demand forecast for institutional investors, the IPO price was set at the lowest end of the expected price range (11,500 to 12,500 won), and the general subscription competition rate was only 4.6 to 1. The fact that the sale of existing shares accounted for 47.86% of the total offering was cited as a reason for the poor market reception.

IPO Market Vitality Hinges on Success of Large-Scale Listings

The market's attention is now on the next big players. The vitality of the IPO market is expected to depend on their success. Companies with valuations ranging from 1 trillion to 3 trillion won, such as Doosan Robotics, SGI Seoul Guarantee Insurance, and EcoPro Materials, are in the spotlight. Doosan Robotics submitted its securities registration statement to the Financial Services Commission on the 23rd and has entered the public offering process for KOSPI listing. Established in 2015, Doosan Robotics has maintained the number one domestic market share since it began mass-producing collaborative robots in 2018. Since 2021, it has ranked fourth in the global market excluding China.

SGI Seoul Guarantee Insurance is the largest guarantee insurance company in Korea and is the first public enterprise to be listed in 13 years since Korea District Heating Corporation in 2010. It is expected to officially start the IPO process around the Chuseok holiday. It passed the preliminary listing review by the Korea Exchange on the 22nd and is currently preparing the securities registration statement. The largest shareholder of SGI Seoul Guarantee Insurance is the Korea Deposit Insurance Corporation, holding 93.85% of the shares. The sale of existing shares accounts for about 10% of the shares held by the Korea Deposit Insurance Corporation. The Korea Deposit Insurance Corporation has valued SGI Seoul Guarantee Insurance at around 3 trillion won. A representative of SGI Seoul Guarantee Insurance stated, "After listing, the Korea Deposit Insurance Corporation plans to gradually sell its shares through block deals (off-hours large-volume trades) at market prices."

EcoPro Materials applied for a preliminary listing review with the Korea Exchange at the end of April but is still awaiting the results. Considering that the review usually concludes within 45 business days, this delay is unusual. The Korea Exchange explained that the review is delayed as they are comprehensively examining whether EcoPro Group's internal control systems and investor protection measures are properly established.

Experts believe that if large-scale listings succeed in the second half of the year, the IPO market could revive. Kwang-Young Oh, a researcher at ShinYoung Securities, said, "Large-scale stocks that attract significant investor interest, such as Doosan Robotics, Seoul Guarantee Insurance, EcoPro Materials, No Brand, and NICE Information Service, have entered the market, and the amount raised through public offerings is expected to be higher than in the first half." Sera Park, a senior researcher at Daishin Securities, said, "About 60 companies are awaiting review in the second half of this year. If the large-scale listings succeed, it is expected that the IPO market will be revitalized with a meaningful increase in the amount raised." Jong-Sun Park, a researcher at Eugene Investment & Securities, said, "The IPO market in the second half of this year is expected to recover investor sentiment for public offering stocks as both institutional demand forecast competition rates and general subscription competition rates are high."

Variables Affecting Overheating in Public Offerings

ShinYoung Securities predicted that the annual number of IPO listings this year will range from 65 to 79. This is fewer than the average of 85 during the booming period of the public offering market amid COVID-19 (2020-2021), but about 14% higher than the 10-year average of 63 from 2011 to 2020.

The amount raised through public offerings is expected to be between approximately 3.7 trillion and 4.1 trillion won. This is a significant decrease compared to 20 trillion won in 2021 and 16 trillion won in 2022. However, considering that the amount raised in the first half was around 1 trillion won, this is an increase. Researcher Oh explained, "Many companies such as Oasis, K Bank, LG CNS, SK Ecoplant, Kurly, Hyundai Oilbank, SSG.com, Kakao Mobility, CJ Olive Young, 11st, Musinsa, and Yanolja have the potential to be listed, so the amount raised is estimated positively."

However, overheating in the public offering market is cited as a variable. Researcher Oh said, "Concerns remain about overvaluation controversies and excessive fluctuations in stock prices after listing seen in some stocks this year, so caution is necessary." He added, "The number of public offering shares is limited, and if interest in public offerings increases, the possibility of overheating grows. It is important not to forget the experience when some overvalued public offering stocks appeared and caused the public offering market to freeze." He also noted, "When large-scale public offering stocks that attract significant investor interest appear, they act as a black hole for public offering investment funds, negatively affecting the supply and demand in the public offering market."

Meanwhile, the IPO market, which showed a cooling trend in investment enthusiasm since February last year, has somewhat improved this year as the stock market has been on an upward trend and small and mid-cap stocks have recorded successful listings. A total of 33 stocks were listed in the first half of this year, with the total amount raised through public offerings reaching about 1 trillion won. This is a 92.5% decrease compared to the first half of last year (when the mega stock LG Energy Solution was listed in January). The average amount raised per stock was 31.4 billion won, the lowest level since 2020.

The average competition rate for institutional demand forecasts for public offering stocks in the first half of this year was 780 to 1. This is more than 18% lower than 1,085 to 1 in the first half of last year and more than 41% lower than the record high of 1,326 to 1 in the first half of 2021. This is interpreted as a result of the withdrawal or postponement of some large-scale listings.