[2024 IPO Market Review] Hot in the First Half, but Cold Winds Blow Strong at Year-End

7 Listed Companies on KOSPI and 88 on KOSDAQ
Intense IPO Subscription Competition in H1 Due to Increased Price Volatility on Listing Day
Sharp Declines Continue on First Day Compared to IPO Price in October

With Fine Medics' new listing on the KOSDAQ market on the 26th, the IPO market for this year has come to a close. Although the excitement for public offering subscriptions was high due to the expanded volatility effect on the listing day, controversies over inflated offering prices persisted. In the fourth quarter of this year, the number of newly listed stocks trading below their offering prices from the first day increased, leading to expectations of intense cautiousness in the IPO market early next year.

According to the Korea Exchange and the financial investment industry on the 27th, the number of newly listed companies in the domestic stock market this year, excluding special purpose acquisition companies (SPACs) and REITs, was 7 on the KOSPI market and 88 on the KOSDAQ market. Approximately 4.3 trillion won was raised through these new listings.

APR, HD Hyundai Marine Solutions, Shift Up, Sanil Electric, Jeonjin Construction Robot, The Born Korea, and M&C Solution entered the KOSPI market. HD Hyundai Marine Solutions, with the largest market capitalization, was listed on May 8th at an offering price of 83,400 won. Its current stock price has risen about 90% compared to the offering price. Jeonjin Construction Robot, listed in August, rose more than 110% compared to its offering price. Among the newly listed companies on the KOSPI market, only The Born Korea saw a slight decline compared to its offering price.

The total amount raised by newly listed KOSDAQ companies was 2.44 trillion won, down 11.9% from 2.77 trillion won last year. The KOSDAQ market's public offering amount has decreased for three consecutive years since recording 3.58 trillion won in 2021. A Korea Exchange official explained, "This is due to significant domestic and international uncertainties, including the U.S. presidential election, as well as a decrease in the number of newly listed companies."

Among the newly listed companies, 42 were listed through the Technology Growth Special Case system, marking the largest scale since the system was introduced in 2005. Sixteen bio companies were listed through this system. Additionally, 17 companies in materials, parts, and equipment, and 5 software companies also entered the KOSDAQ market via the Technology Growth Special Case system.

This Year's IPO Started with 'Double Triple'... Controversy Over Overvalued Offering Prices

The IPO market subscription fever this year was hotter than ever. Woojin Entech, the first company to list this year, closed trading on its first day, January 24th, at 21,200 won, a 300% increase from the offering price of 5,300 won. Hyundai Hims also closed trading on its listing day, January 26th, at 29,200 won, a 300% increase from the offering price of 7,300 won.

Following KNS, LS Materials, and DS Danseok, which listed at the end of last year, Woojin Entech and Hyundai Hims saw their stock prices rise to the maximum limit of 300% on their first day, attracting massive funds into the public offering subscription market. The average competition rate for general subscriptions in January this year was 1,382 to 1, significantly surpassing last January's average of 378 to 1.

Thanks to the influx of funds from the beginning of the year, APR and HD Hyundai Marine Solutions, considered major IPOs, smoothly entered the KOSPI market in the first half of the year. APR recorded a competition rate of 663 to 1 in the demand forecast for institutional investors. The offering price was set at 250,000 won, exceeding the upper limit of the expected range of 147,000 to 200,000 won. Deposits worth 13.91 trillion won flooded into the public offering subscription for general investors.

Researcher Park Jong-sun of Eugene Investment & Securities explained, "The average competition rate for general subscriptions in the first half of this year's IPO market reached an all-time high of 1,610 to 1. Looking at the offering price confirmation status of 29 companies that underwent demand forecasting for institutional investors in the first half, 100.0% of them were priced above the upper limit of the offering price."

The yield from selling public offering stocks at the opening price on the first day of listing in the first half of this year reached 124.1%. This explains why funds poured into the public offering subscription market. Investors rushed to mobilize as much capital as possible to receive public offering stocks.

However, expected returns began to decline in the second half of this year. The average opening price yield compared to the offering price for companies newly listed in July was 32.8%. In August, the average opening price yield slightly rose to 38.7%. Including July and August, the opening price yield for newly listed companies in the third quarter was 43.8%. As the opening price yield decreased compared to the first half, controversies over overvalued offering prices continued.

Broken Unbeatable Record of Public Offering Investments... IPO Slump Expected Until First Half of Next Year

Starting with C-MES, which listed on the KOSDAQ market on October 24th, the investment yield on the first day of listing turned negative. C-MES was listed at an offering price of 30,000 won but closed the first day at 23,100 won. Waybis, listed on October 25th, closed the first day at 10,890 won, down 27.4% from the offering price of 15,000 won. Following these, Clobot, Sungwoo, A-Lux, Top Run Total Solution, HEM Pharma, TomoCube, Airrain, Nomus, Dotmill, Three Billion, Escam, MOT, RF Systems, and Synapsoft all sharply declined compared to their offering prices.

Since the expansion of price fluctuation limits on the first day of listing in June last year, the unbeaten record of public offering investments lasting over a year was broken, affecting the subscription market. Three A Logics, listed on the 24th, recorded a competition rate of 88.5 to 1 in general subscriptions, raising only 149.3 billion won in deposits. Even relatively popular new drug development companies were sidelined in the subscription market. Onconic Therapeutics, listed on the 19th, recorded deposits of 230 billion won and a competition rate of 92 to 1 in general subscriptions.

The KOSDAQ index fell 11.6% in the fourth quarter of this year. Along with recession concerns and political uncertainties caused by the '12·3 Emergency Martial Law' incident, investment sentiment weakened. The sluggish stock market affected the IPO market, resulting in low competition rates for public offering subscriptions. The year-end IPO market slump is expected to impact until the first half of next year. The industry fears that the absence of major public offerings may continue for some time.

An investment banking (IB) industry official said, "Considering the year-end IPO market atmosphere, it seems difficult for major public offerings to be listed in the first half of next year. We need to watch the atmosphere around LG CNS and K-Bank, which are planning to list in February next year."