[Why&Next] The Hot First Half IPO Market... Will It Continue in the Second Half?

IPO Fundraising of 1.67 Trillion KRW in the First Half of This Year, Up 60% YoY
Increased Volatility Due to Expanded Price Limit
Many Companies Undersubscribed at IPO Price... Bubble Concerns
"Key to H2 IPO Market Is Success of Large-Scale Listings"

The number of companies that conducted initial public offerings (IPOs) in the first half of this year (excluding SPACs) slightly decreased compared to the same period last year, but the amount raised increased by nearly 60%. In particular, due to the expansion of the price limit for public offering shares implemented since last year, the opening price rose by an average of over 120% compared to the public offering price. However, as the price fluctuations on the first day of listing became large, there have been criticisms that the IPO market has turned into a speculative arena, and frequent occurrences of stock prices falling below the public offering price have intensified the controversy over the public offering price bubble.

Hot IPO Market in the First Half... Speculation Criticism and Public Offering Price Bubble Controversy Spread

According to the financial investment industry on the 4th, the number of newly listed companies in the first half of this year was 29 in total, including 2 on the KOSPI and 27 on the KOSDAQ. The amount raised through public offerings was 1.671 trillion KRW. Compared to the same period last year, the number of newly listed companies decreased by 4, but the amount raised increased by 59.5%.

The biggest characteristic of companies listed in the first half of this year is that most exceeded their expected public offering price in demand forecasting. Except for HD Hyundai Marine Solutions and Gridwiz, all listed companies exceeded the upper limit of their expected public offering price. In the first half of last year, 33 companies were listed, among which only 8 exceeded the expected public offering price.

Along with this, the opening price yield on the first day compared to the public offering price was also high. The average increase rate from the public offering price to the opening price in the first half reached 124%. This was because, since June 26 last year, the price fluctuation range was expanded to 60-400%, causing some stocks to have significantly high opening prices. The average in the first half of last year was 67.8%. As a result, the average stock price increase rate compared to the public offering price on the first day of listing was 91.4%. Looking at specific stocks, the order is Woojin Entech (300%), Hyundai Hims (296.6%), Inix (232.5%), and RamediTech (212.5%).

As the yield compared to the public offering price rose significantly, the enthusiasm of general investors for public offering shares increased. In the general subscription competition rate in the first half of this year, the proportion of rates over 1000 to 1 was 79% (a total of 23 companies), which increased significantly compared to 45% in the first half of last year. The companies with the highest general competition rates were Woojin Entech (2707.2 to 1), IMBDX (2654.2 to 1), and Studio Samik (2650.3 to 1).

However, as the fluctuation range widened, there have been criticisms that the market is turning into a speculative arena. On the day of RamediTech’s KOSDAQ listing on the 14th of last month, the trading volume reached 1.2164 trillion KRW. This accounted for 14.30% of the total KOSDAQ trading volume of 8.5025 trillion KRW. The stock price also started trading at 50,000 KRW, which was 212.5% higher than the public offering price of 16,000 KRW, and closed at 23,150 KRW, showing extreme volatility.

Along with this, controversy over the public offering price bubble has also emerged. As of the closing price on June 28, the average yield of listed companies compared to the public offering price was 25.8%. However, looking in detail, many companies are falling below the public offering price. There are 17 companies trading below the public offering price, and 21 companies whose stock price declined compared to the closing price on the first day of listing.

IPO Giants Challenge Listing Amid a Breather

The securities industry expects the IPO market in the second half to proceed in a calmer atmosphere compared to the first half. The average institutional competition rate for demand forecasting in the first quarter of this year was 918 to 1, but it dropped to 827 to 1 in the second quarter. Also, the general subscription competition rate decreased from 1796 to 1 to 1481.5 to 1. Furthermore, following the Pado incident and the cancellation of Innogrid’s listing, there is a growing atmosphere to strengthen internal control and investor protection measures. As a result, the approval period for IPO companies is lengthening.

Jang Seon Han, director of IR Qudus, a corporate PR consulting firm, explained, "Excluding SPACs, about 50 companies applied for preliminary listing examination from April to June, which is causing the approval period to lengthen," adding, "In the second half, the concentration of IPO schedules is expected to continue, leading to a selection process among stocks."

Researcher Suyeon Kim of Hanwha Investment & Securities noted, "The average stock price yield compared to the public offering price for companies listed less than six months ago as of last month was -1.4%, which is opposite in sign compared to the combined KOSPI and KOSDAQ yield of 5.9%," and pointed out, "This indicates that the IPO overheating is cooling down."

However, since large IPO companies are waiting, the atmosphere may change depending on their success. The major IPO companies planning to list in the second half include Shift Up and K-Bank. Shift Up, a game development company, has completed institutional demand forecasting and proceeded with public offering subscriptions. K-Bank filed for IPO examination last month.

Researcher Jongseon Park of Eugene Investment & Securities said, "With the success of major IPO companies in the first half, the number of companies pursuing listings in the second half is expected to increase," adding, "Depending on the success and progress of companies currently pursuing IPOs, additional major companies are expected to proceed with listing plans."