As the initial public offering (IPO) market freezes, it has been revealed that seven out of eight corporations that went public this year reported negative returns from the first day of trading. LG CNS, regarded as a major debut in the first half of the year, dropped nearly 10% on its first trading day compared to its offering price. Experts noted that the prolonged sluggishness in the securities market is expected to intensify the 'picking of the gems' among stocks.
According to the Korea Exchange on the 6th, seven of the eight corporations (excluding special purpose acquisition companies) that entered the domestic securities market between Jan. 2 and Feb. 6 this year failed to exceed their offering prices on their first trading day. The average stock price fluctuation rate on the first trading day for the eight newly listed corporations is negative (-) 14.7%. In particular, Day 1 Company, WISEnut, and Aiji net experienced drops of over 30% compared to their offering prices on the first day.
Most corporations have continued to experience poor stock prices after going public. As of the 6th, all newly listed companies, except for ASTERASYS, have not risen above their offering prices. Meatbox has fallen 45.3% since its listing, followed by Day 1 Company (-44.3%), Aiji net (-38.9%), WISEnut (-28.1%), Samyang NC Chem (-7.2%), PIE (-9.4%), and LG CNS (-6.8%).
Until the first half of last year, the formal expectation was that stocks would record 'doubling' (twice the offering price) and 'triple doubling' (four times the offering price) on the day of listing. Consequently, investors had high expectations for public offerings. In fact, the average increase rate on the first trading day for five newcomers that went public during the same period last year reached 178%. In January last year, WOOJIN Ntec and HYUNDAI HYMS each rose by 300% on their respective listing days, successfully achieving 'doubling'.
The process of determining offering prices contrasts with that of last year. From January to July last year, the final offering prices of all corporations that went public were confirmed above the desired range of institutional investors. However, for corporations listed this year, only five out of eight had their offering prices set at the upper end of the desired range.
Since the second half of last year, the causes of the notable stagnation in the IPO market include the 'Black Monday' incident in August, Trump risk, and increased domestic and foreign uncertainties as the 12·3 emergency martial law situation arose, leading to a decline in the domestic securities market. Amid the sluggishness of the market, Kbank, CK Solution, and ACE Engineering withdrew their listings.
Concerns regarding 'inflated offering prices' by listed companies are pointed out as factors that have dampened investor sentiment toward public offerings. Inflated offering prices refer to a newly listed company’s practice of comparing itself to larger firms, raising the offering price, or hiding unfavorable situations to boost asset values. Last year, FADU, a semiconductor design company, was referred to prosecution for allegedly inflating its offering price by concealing the fact that trading with major clients had ceased.
In relation to this, the financial authorities announced the 'IPO Improvement Measures' on the 21st of last month. They have taken a position to improve the system so that lead underwriters properly determine offering prices and strive to secure long-term investors.
Experts analyzed that in order to revitalize the IPO market this year, the sluggish movements of the securities market must first be resolved. Lee Chang-hee, a researcher at Samsung Securities, said, “Since the beginning of this year, the atmosphere of the IPO market, which has been sluggish since last fall, continues,” adding that “a recovery in the domestic securities market, which has a high correlation with the domestic IPO market, should precede.”
With nine corporations still poised for general subscription by the end of this month, the 'picking of the gems' among public offerings is expected to intensify further. Oh Seung-hwan, a researcher at Hanwha Investment & Securities, said, “Investing in listed companies should not be approached with a focus on short-term trades,” and emphasized that “going public is a process for companies to discover their own value in the market in the medium to long term.” He continued, “Rather than concentrating on short-term price formation, it is essential to check the performance indicators and future plans of prospective listed companies.”