Phil Energy, IPO Stock Return Drops from 288% to 4% in 4 Months

IPO Price at 34,000 KRW Followed by 100% Bonus Issue
Increased Volatility on Listing Day Leads to More 'L'-Shaped Stock Price Movements

The stock price of Phil Energy, an equipment company essential for secondary battery production processes, has been steadily declining since its listing on July 14. The stock, which rose 288% above the IPO price on the first day of listing, has fallen back to the IPO price level within four months.

According to the financial investment industry on the 13th, Phil Energy's stock price is 17,720 KRW, down more than 70% from the highest price of 66,000 KRW (adjusted price) recorded on the first day of listing. Phil Energy went public at an IPO price of 34,000 KRW and resolved a 100% bonus issue in September. On the 23rd of last month, the number of issued shares doubled due to new share issuance. If investors who participated in the pre-IPO subscription still hold their shares, their returns have dropped from 288% on the first day of listing to 4% after four months.

Phil Energy attracted attention before listing for two reasons. First, it belonged to the secondary battery-related sector, which was the leading sector in the stock market at the time, and second, it was listed immediately after expanding the price fluctuation range on the first day of listing, which raised expectations. During the period when the IPO price was finalized and the subscription was underway, secondary battery-related stocks in the domestic market continuously rose. Investors lined up to invest in the newly emerging secondary battery equipment stocks.

Previously, Phil Energy conducted a demand forecast for institutional investors from June 29 to 30. A total of 1,955 domestic and international institutions participated, recording a competition rate of 1,812 to 1. Among the institutions participating in the demand forecast, 99.7% offered prices exceeding the upper limit of the IPO price range (26,300 to 30,000 KRW). The lock-up agreement ratio was also as high as 59.2%. Reflecting the enthusiasm in the demand forecast, the lead underwriter Mirae Asset Securities and Phil Energy set the IPO price at 34,000 KRW. During the two-day general investor subscription from July 5 to 6, the deposit amount reached 15.8 trillion KRW.

Earlier, the regulatory authorities expanded the price fluctuation range on the first day of listing from June 26 to between 60% and 400%. This was a measure to discover the appropriate stock price early. After expanding the fluctuation range, companies such as Securecen, Opennol, Almek, and Innosimulation were listed before Phil Energy. Compared to the previous method, which set the opening price at 90% to 200% of the IPO price and applied a 30% upper and lower limit, the first-day price increase was larger. A securities firm official explained, "The increased volatility seems to have attracted speculative funds aiming for high short-term profits," adding, "Phil Energy's stock price also rose to about three times the IPO price on the first day, reflecting the impact of the expanded fluctuation range."

Phil Energy is a company that mass-produces core equipment for secondary battery manufacturing processes based on proprietary laser process technology and precision control technology. It was established in 2020 after being spun off from its parent company, Phil Optics. The company focuses on developing laser notching process equipment and stacking process equipment. In 2015, it developed the world's first laser notching process equipment and supplied it to Samsung SDI's mass production line. Last year, it developed the industry's first integrated equipment capable of simultaneously performing stacking and notching processes. As of the third quarter of this year, it recorded cumulative sales of 134.2 billion KRW and operating profit of 9.4 billion KRW. Compared to the same period last year, sales slightly increased, but operating profit decreased by 15.3%.

It has been five months since the expansion of the price fluctuation range on the first day of listing. Looking at the stock price trends of newly listed companies, many show an 'L'-shaped pattern where the price soars on the first day but gradually declines over time. In the past, institutions participating in demand forecasts tried to secure large allocations by promising lock-up periods for promising stocks. However, in the second half of this year, the number of institutions agreeing to lock-up periods has decreased. This change reflects a judgment that it is better to reduce risk and increase returns by selling early after listing, even if it means receiving fewer shares.

A financial investment industry official said, "Cases where newly listed stocks only show a brief rise on the first day of listing are increasing," adding, "Concerns about IPO price bubbles have grown in the IPO market." He continued, "It is a positive factor that incentives for high-quality companies to enter the market have increased," but also noted, "It is time to consider the side effects caused by the large gap between the IPO price and the first-day stock price."