This article was displayed on the CHOSUNBIZ Money Move (MM) site on Jan. 2, 2025, at 4:06 p.m.
Concerns about overhang (mass sell-off) regarding KB Balhae Infrastructure Investment Company (KB Balhae Infra), which was listed on the KOSPI market at the end of last year, are increasing. As the stock price of KB Balhae Infra is already below the offering price, the outlook for individual and institutional investors is not looking good.
According to the Korean Exchange on the 2nd, KB Balhae Infra's stock price closed at 7,810 won, up 50 won (0.64%) from the previous trading day. It debuted in the KOSPI market in November last year, dreaming of being a representative dividend stock like Macquarie Infrastructure, but its stock price is already more than 7% below the offering price of 8,400 won.
The issue is that KB Balhae Infra's stock price may decline further next month. This is because the lock-up period for the volumes held by brokerages that took on the stocks during the subscription process lasts until February. From March, securities valued at over 80 billion won may be released into the market.
KB Balhae Infra was planning to raise 960 billion won through public subscription, representing 60% of the total offering amount (1.6 trillion won), but the final allocation was only 134 billion won. The unsold volume (approximately 826 billion won) has returned to the underwriters (KB Securities, Daishin Securities, Kiwoom Securities), and the underwriters have decided not to sell the unsold volume for three months. This period ends in February.
An official from the investment banking (IB) sector noted, 'Due to the under-subscription, brokerages ended up holding more shares than expected,' adding that 'even considering the aggregates, the risk has increased due to holding significantly more volumes unexpectedly, so there is a possibility they will look to liquidate their holdings around the time the lock-up is released, even at a loss.'
There are analyses suggesting that brokerages will not sell their shares all at once, even at a loss. Another IB industry source explained, 'Since it is already a loss position, selling a large number of shares at once may increase the loss further due to the low transaction volume of Balhae Infra. However, the offering price of 8,400 won will likely serve as a strong resistance level.'
Institutional investors are similarly exposed to the overhang issue. Their lock-up period for KB Balhae Infra shares is longer at six months compared to the brokerages' lock-up period. Pension funds, insurance companies, and banks still hold shares of KB Balhae Infra. Although some were sold during the listing process, they collectively hold 55,637,364 shares, valued at approximately 467.3 billion won based on the offering price.
The National Pension Service holds the most shares with 8,653,702 shares, followed by ▲ Government Employees Pension (5,735,804 shares) ▲ Hanwha Life Insurance (5,735,804 shares) ▲ DB Insurance (5,735,804 shares) ▲ Teachers' Pension (5,735,804 shares) ▲ Samsung Life Insurance (5,735,804 shares) ▲ ABL Life Insurance (5,735,804 shares) ▲ NongHyup Bank (2,867,909 shares) ▲ Heungkuk Life Insurance (2,867,909 shares) ▲ DB Life Insurance (2,294,331 shares) ▲ Fubon Hyundai Life Insurance (1,727,52 shares) ▲ Kyongnam Bank (1,147,172 shares) ▲ Busan Bank (1,147,172 shares) ▲ Hyundai Marine & Fire Insurance (573,593 shares).
An institutional investor source explained, 'From the perspective of institutions, Balhae Infra was fine as long as dividends came out when it was an unlisted stock, but now, with the stock price reflecting performance, if the stock price continues to fall, it may become burdensome to hold for a long time.'
Regarding such concerns, a representative from KB Asset Management stated, 'There will be little impact on Balhae Infra's infrastructure asset fundamentals, and a dividend yield of about 8% is expected at the current market value,' adding, 'Even after the lock-up expires, shareholders are likely to want to hold their stocks since they can receive semi-annual dividends until June.'
KB Balhae Infra is an infrastructure fund that primarily invests in social overhead capital (SOC) such as toll roads, tunnels, and railways. It was established in 2006 with initial contributions of 1.19 trillion won from 17 institutional investors, including KB Kookmin Bank. KB Asset Management is responsible for trust management.
Currently, it is investing in toll road assets used by approximately 10.8 million vehicles annually, including the ▲ Daegu-Busan Expressway ▲ Namyangju Susuk-Hopeong Road ▲ Seoul Yongma Tunnel ▲ Busan Sanseong Tunnel ▲ Suwon Northern Outer Ring Road, and distributing revenue as dividends.
As a result of conducting public subscriptions for general investors in November last year, the competition ratios were KB Securities 0.31 to 1, Daishin Securities 0.4 to 1, and Kiwoom Securities 0.05 to 1. After suffering a defeat in the earlier institutional investor demand forecast, the public offering volume was reduced by 20% from approximately 23.81 million shares to 19.05 million shares. The final competition ratio for institutional investors' subscription was only 3.99 to 1.