Ants Swarm Winners, Frowning in Just One Day

Stock Price Volatility of Newly Listed Companies Expands Due to Influx of Speculative Funds
Winners' Market Cap: 5.82 Billion KRW to 27 Billion KRW to 18 Billion KRW
Individual Investors in LK Chem Suffer Unrealized Loss Rate of -18%

Since the beginning of this year, the stock price volatility of newly listed companies entering the domestic stock market has been increasing. This appears to be the result of short-term speculative funds flocking to take advantage of the high volatility on the first day of listing to seek capital gains. Winners, which rose 300% compared to the IPO price on the first day of listing, plunged more than 20% the next day. Although the stock price remains high compared to the IPO price, the majority of general investors, excluding IPO subscribers, have not made profits. Market experts advised that investors should consider that the risk of loss increases as volatility rises.

According to the financial investment industry on the 26th, individual investors purchased 25.6 billion KRW worth of Winners shares over two days from the 24th to the 25th. The average purchase price was 31,181 KRW, resulting in an unrealized loss rate of -15.8% based on the current stock price.

Winners, a wiring equipment company, was listed on the KOSDAQ market on the 24th with an IPO price of 8,500 KRW. The market capitalization based on the IPO price was 58.2 billion KRW but surged to 232.8 billion KRW in just one day. On the first day of listing, the stock price started at 23,450 KRW and soared to the price limit of 34,000 KRW. This was the first newly listed stock this year to rise 300% compared to the IPO price. Trading was also active in proportion to the high increase. The trading volume on the first day of listing was 841.4 billion KRW, which was 2.6 times the market capitalization.

The next day also saw high price volatility. The stock price started at 34,400 KRW, rose to 39,400 KRW, and then closed at 26,250 KRW. The market capitalization, which had increased to 270 billion KRW, shrank to 180 billion KRW. Although it decreased by 90 billion KRW from the peak, it was still 130 billion KRW larger compared to the IPO price.

Mirae Asset Securities, the lead underwriter, valued Winners’ stock at 10,264 KRW per share. This valuation applied the average price-earnings ratio (PER) of 24.4 times from comparable companies to the cumulative net profit of 1.7 billion KRW in the third quarter of last year.

The financial investment industry cited the small number of circulating shares as one of the reasons for the sharp rise in Winners’ stock price on the first day of listing. Winners Holdings Limited, the largest shareholder of Winners, holds 74.44% of the shares after listing. Except for the 1.7 million shares offered in the IPO, no additional shares will be released for three months. Since there is no overhang (potential sell-off volume) concern, there are relatively fewer variables that could affect the market price. If a large sell order emerges on the first day of listing, it could influence the stock price trend. This created conditions for speculative funds aiming for high short-term capital gains to gather.

LK Chem, which was listed on the KOSDAQ market the day before, also has a high largest shareholder stake after listing. The largest shareholder holds 57.1%. The tradable shares on the first day of listing accounted for only 22.1% of the total issued shares. LK Chem’s stock price also experienced a rollercoaster on the first day of listing. It started trading at 64,300 KRW, rose to 77,800 KRW, and closed at 58,800 KRW. Individual investors bought 49.2 billion KRW worth of shares in one day and recorded an unrealized loss rate of -18.2%.

A financial investment industry official explained, "Speculative trading is increasing, taking advantage of the fact that stock prices can rise up to 300% compared to the IPO price on the first day of listing," adding, "High volatility means there is also a high possibility of investment losses."