Big Catch After 3 Years... Next Year, 'Trillion-Won' Public Offering Market Opens

Big Market Expected After 3 Years Since LG Energy Solution
'Securities Firms' Cash Cow' ECM Sector Also Busy
Expecting First Half of Next Year if IPO Preliminary Review Passes Smoothly

Attention is focused on LG CNS and DN Solutions, regarded as major "IPO whales." Given that multi-trillion won IPOs have been rare even amid the IPO boom, it is expected that a significant "big event" will take place for the first time in over three years since LG Energy Solution raised 12 trillion won in December 2021. Securities firms are also busy with final preparations during the peak season in October.

According to the Korea Exchange on the 15th, six companies submitted preliminary listing review applications to the exchange this month. Two large conglomerate affiliates, LG CNS and DN Solutions, are listed as candidates challenging the KOSPI market. Since it typically takes more than six months from passing the preliminary review to listing, the actual listing is expected in the first half of next year.

DN Solutions, the world's third-largest machine tool manufacturer, is expected to have a market capitalization of 4 to 6 trillion won after listing. LG CNS, which handles IT services for the LG Group, is also projected to have a similar market capitalization of 5 to 6 trillion won. Lotte Global Logistics, a logistics affiliate of the Lotte Group, with an estimated market capitalization of about 1.5 trillion won, is also expected to submit its review application before the end of the year.

The reason these companies are attracting attention is that they are large conglomerate affiliates with high financial stability. This is because market distrust of technology-specialized companies has become widespread following the backlash from the semiconductor company Pado, which caused controversy over "inflated listings." For example, LG CNS recorded sales of 5.6053 trillion won and net profit of 332.4 billion won last year. DN Solutions also posted sales of 1.7923 trillion won and net profit of 320.4 billion won last year.

The expectation that both companies will easily surpass the 5 trillion won valuation threshold is also increasing market interest in them. K-Bank, which is scheduled to list on the KOSPI on the 30th of this month, is facing controversy over overvaluation, and opinions are divided on whether it will achieve a market capitalization of 5 trillion won. K-Bank previously attempted a new listing in 2022 but faced setbacks.

An IB industry insider said, "It is expected that a large-scale public offering will emerge for the first time in three years since LG Energy Solution raised 12 trillion won at the time of its listing," adding, "Large IT companies are also likely to prepare extensively around April next year, so market interest is expected to continue."

LG Energy Solution, which entered the KOSPI market in 2021, had a final public offering of 42.5 million shares, with a total offering size reaching 12.75 trillion won. With a fixed offering price of 300,000 won, its market capitalization approached a staggering 70 trillion won. On the first day of listing, it ranked second in market capitalization, raising the combined market capitalization of the LG Group to around 237 trillion won.

Meanwhile, with the IPO market momentum continuing from last year into this year, competition among houses has intensified. The securities industry’s revenue sources have shrunk due to the deterioration of the sales and trading (S&T) departments caused by real estate project financing (PF) and the Hong Kong-originated equity-linked securities (ELS) crisis. Amid this, the traditional IB sector, the equity capital markets (ECM) division, has taken on the role of a cash cow, increasing the burden of generating profits.

Another IB industry insider hinted, "While other IB divisions have become difficult, the traditional IB ECM division has come to be seen as a stable source of revenue," adding, "Nowadays, CEOs and executives, who previously only appeared for deals worth over a trillion won, personally participate in presentations (PTs) in the current situation."