Newly listed stocks on the KOSDAQ market have continued to see poor stock performance since the beginning of the year. MeatBox Global, the first listed corporation this year, fell more than 25% compared to its offering price on its first trading day on the 23rd, and stocks of follow-up entrants, such as WISEnut and Day 1 Company, which listed on the 24th, also dropped more than 30% compared to their offering prices.
The decline in stock prices on the listing day of these corporations was anticipated. This is due to the concerns over overvaluation, as they had already faced poor demand forecasting. There are criticisms that the offering price was set too high despite lukewarm responses from institutions. Additionally, the designation of the 27th as an alternative holiday coincided with the listings, leading to a dispersion of supply and demand, compounded by a decline in investor sentiment due to the extended holiday break.
According to the financial investment industry on the 24th, MeatBox Global, which debuted as this year's first listed corporation, ended its first transaction on the 23rd with a sharp decline of 25% compared to its offering price. The saying that the first IPO share in January tends to do well did not hold true for MeatBox Global. On that day, it continued to decline by over 13%, maintaining a bearish trend.
The plunge continued for newly listed stocks entering the market on the 24th, following MeatBox Global. Among the three corporations (ASTERASYS, Day 1 Company, WISEnut) that entered the KOSDAQ market that day, two saw substantial declines, excluding ASTERASYS. The stock price of Day 1 Company dropped 40% compared to its offering price. Newly listed corporations can fall by as much as 40% on their first day.
Analyses suggest that the overvaluation of corporate values has led to sharp declines in stock prices on the listing day. In particular, concerns about overvaluation had already been raised during the listing process for MeatBox Global and Day 1 Company. This is because they used the price-to-sales ratio (PSR), which indicates stock price levels in relation to sales.
The PSR is an indicator that shows how many times a company's stock price is compared to its sales per share (SPS). The PSR was primarily used by corporations belonging to rapidly growing industries that do not generate profits but are linked to market competitiveness.
However, both MeatBox Global and Day 1 Company carried the PSR directly during the listing process. The two companies applied PSRs of 3.5 times (Day 1 Company) and 1.8 times (MeatBox Global). Based on this, the maximum corporate values computed for each corporation were 362.1 billion won and 127.8 billion won.
Both companies already faced poor demand forecasting from institutional investors. While MeatBox Global's demand forecasting recorded a competitive ratio of 849.95 to 1, most submitted prices were lower than the lower end of the offering price band, leading to the finalization of the offering price at the bottom of the hoped-for range. Day 1 Company adjusted its price downward by more than 40% compared to the lower end of the band. The mandatory holding commitment ratio was 0%.
A source in the securities industry said, "Since the PSR uses just sales growth as a quantitative criterion, it has inevitably become an indicator that cannot avoid issues of reliability in valuation. Especially, who would buy from institutions participating in demand forecasting that did not commit to mandatory holding?"
Although WISEnut did not use the PSR, it faced controversies over overvaluation due to not reflecting the demand forecasting results. In the demand forecasting conducted from the 3rd to the 9th, 370 institutions participated, with 81% of them offering prices below 17,000 won, but WISEnut finalized its offering price at 17,000 won.
Concerns have been raised that the IPO has become a channel for existing investors to exit, thereby fueling overvaluation. For instance, financial investors (FI) who had previously invested based solely on the growth potential of MeatBox Global and Day 1 Company need inflated listing prices to recover their investment.
A source from an asset management company focusing on IPO investments said, "With the trend of 'IPO invincibility' that lasted for about six months ending in the second half of 2023, individual investors are now starting to pick and choose between IPO shares. There are now no individual investors looking to invest in overvalued IPO shares, especially with the heavy presence of FI funds."
On that day, the timing of the listings for Day 1 Company and WISEnut was also unfavorable. On that day alone, three newly listed stocks entered the market. Day 1 Company advanced its listing date due to the designation of the 27th as an alternative holiday. When the listing dates coincide, it becomes difficult for stock prices to rise due to the dispersion of IPO investment supply.
Moreover, the upcoming extended holiday due to the Seollal holiday also became a negative factor. Stock sale proceeds can be withdrawn after two business days, meaning if trading occurred on the 23rd when MeatBox Global was listed, the withdrawal would only be possible on the 31st. Proceeds from that day's trading would be available on February 3.
Industry insiders predict that if newly listed corporations that are not in a well-regarded sector in the domestic stock market encounter controversies over overvaluation, the decline in stock prices on the listing day will persist. This is because IPO shares are perceived as thematic stocks in the domestic stock market. Consequently, if the supply of IPO shares is low, stock prices may rise due to supply and demand forces.
A source from the securities industry commented, "ASTERASYS, which listed on the KOSDAQ market that day, rose over 100% compared to its offering price, unlike Day 1 Company and WISEnut. As a medical device manufacturing and sales corporation, it has recently been regarded as an emerging industry and saw a successful demand forecast."
Meanwhile, financial authorities are pushing for improvements to the IPO system to prevent the intensification of short-term trading and overheating of offering prices in the IPO market. They plan to implement a new priority allocation system that guarantees more than 40% of the allocation to institutional investors that commit to mandatory holding (for at least 15 days). The maximum commitment bonus period will also be extended from the previous 3 months to 6 months.