IPO Market Heats Up: Strong Momentum Continues Into June

Initial Prices of Newly Listed Companies in May Rise 88% on Average Compared to Offering Price
Market Funds Flock to IPOs Amid Rising Returns
Fierce Competition in Demand Forecasting and IPO Subscriptions

Funds are once again flowing into the initial public offering (IPO) market. As the share prices of newly listed companies on the domestic stock market have surpassed their offering prices, subscription competition has intensified. Upcoming IPOs include Linksolution, GC Genome, Autocrypto, GFC Life Science, and Proteina. There are also expectations that the introduction of regulations encouraging institutional investors to commit to mandatory holding periods will help ease concerns about IPO overvaluation.

According to the financial investment industry on June 4, Intocell, which was listed on the KOSDAQ market on May 23, saw its share price rise by about 168% compared to its offering price of 17,000 won after just seven trading days. On the first day of listing alone, the stock price surged 95% above the offering price, allowing IPO investors to achieve high returns.

Intocell, an antibody-drug conjugate (ADC) platform company, conducted a book-building process for five business days starting on April 29, targeting domestic and international institutional investors. A total of 2,391 institutions participated, resulting in a competition ratio of 1,151.5 to 1. The final offering price was set at the upper end of the desired range (12,500 to 17,000 won). For the general investor subscription, deposits totaling 7.23 trillion won were collected.

Dalba Global, considered a major player in the IPO market, is also maintaining a share price well above its offering price. Dalba Global was listed on the KOSPI market on May 22 at an offering price of 66,300 won. On the first day, the stock price rose to 123,300 won before closing at 111,000 won. Since then, the stock has continued to climb, and the current price exceeds 140,000 won. Dalba Global attracted over 7 trillion won in subscription deposits during its IPO.

The majority of new listings that entered the stock market last month have also posted high returns compared to their offering prices. Among the nine companies listed last month (excluding SPACs), the average initial return compared to the offering price was 87.9%. The average closing return on the day of listing was 93.8%. Companies that went public last month include Dalba Global, Intocell, Babio Bijou, Immunoncia, Rokit Healthcare, Wonil ENI, Organoid Science, and Now Robotics.

Park Jongseon, a researcher at Eugene Investment & Securities, explained, "The IPO market in May appears to have stabilized compared to April," adding, "Initial and closing returns relative to the offering price are at higher levels than in the past." He further noted, "The return on market capitalization based on the offering price, as of the closing price on May 30, was calculated at 128.5%. Returns have increased as stock prices have risen over time following listing."

As post-listing share prices continue to exceed offering prices, demand forecasting has also heated up. Of the eight companies that conducted demand forecasts, seven set their offering prices at the upper end of the desired range. The average competition ratio for demand forecasting was 1,053 to 1, indicating fierce competition compared to previous years.

GC Genome and Linksolution, which recently conducted demand forecasts, also set their offering prices at the upper end of the desired range. GC Genome, a clinical genomics company, accepted bids for five days starting May 19. Of the participating institutions, 95.9% expressed their intention to purchase IPO shares at the upper limit of 10,500 won. GC Genome, which has the second-largest IPO size among tech-special listing companies this year, will raise over 20 billion won through its successful demand forecast.

Linksolution, a 3D printing company, saw participation from 2,202 institutions during its demand forecast conducted from May 16 to 22. Of the shares bid during the demand forecast, 99% were at prices of 23,000 won or higher, which is the upper end of the desired range. Kang Kyungkeun, a researcher at NH Investment & Securities, analyzed, "3D printing services are consignment foundry services that directly manufacture and supply parts requested by customers," adding, "The company is expanding its client base into mobility, defense, and medical sectors."

Meanwhile, changes to the system that are expected to have a positive impact on post-listing share prices are also on the horizon. Starting next month, an IPO reform plan will be implemented that strengthens the responsibilities of lead managers and increases the mandatory holding volume for institutional investors. This could affect the determination of offering prices during demand forecasting. If the 40% mandatory holding commitment ratio for institutional investors is not met, the lead manager will be required to underwrite 1% of the unsubscribed shares (up to a maximum of 3 billion won) and hold them for six months. If more shares cannot be sold on the first day of listing, institutions are likely to become more cautious. As institutions become more selective, the proportion of IPOs priced at the upper end of the desired range may decrease.

Cho Daehyung, a researcher at DS Investment & Securities, said, "There is an increase in aggressive participation, including long-term commitments, in demand forecasts for companies with attractive fundamentals and valuations," adding, "The polarization of demand forecast results is also likely to continue for the time being."