Attention is on whether the initial public offering (IPO) market, which was halved in the first half of this year, can recover in the second half. Unlike the first half, when supply shrank due to concentration in leading stocks and policy risks from overlapping listings, more corporations are expected to throw their hats in the ring for offerings in the second half. However, sorting the wheat from the chaff by corporation is likely to become more difficult.
According to the Korea Exchange (KRX) on the 12th, 17 corporations (excluding SPACs) newly listed on the Korea Exchange and KOSDAQ in the first half of this year (January–June). That is less than half of the first half of last year (38). The first-half offering size was 1.1 trillion won, half of the first half of last year (2.2 trillion won).
The first-half IPO market drought was the result of a combination of concentration in large-cap stocks and delays in overlapping-listing regulations. As funds flocked to Samsung Electronics and SK hynix, which helped drive the KOSPI past the 9,000 level, there was an emergency for the success of new listings and for valuing corporations.
On top of that, the announcement of guidelines on overlapping listings was repeatedly delayed until July this year, which also acted as a negative factor. The Financial Services Commission and the Korea Exchange (KRX) had pushed since last year for a principle ban on overlapping listings and criteria for exceptional allowances, but the specific guideline announcement was postponed until July this year.
In this process, the schedules of corporations pursuing listings were pushed back or reviews ran into difficulties. On the main board, Essex Solutions withdrew its preliminary listing review, and on KOSDAQ, reviews for DTS and Duksan Navcours were delayed.
Choi Jong-kyung, a researcher at Heungkuk Metaltech Securities, said, "In the first half of this year, an unprecedented stock price surge occurred as the KOSPI broke through 5,000 points and then 9,000 points in succession, and the issuance market was relatively neglected," and noted, "The market flow was also blocked as the announcement of overlapping-listing guidelines was put off for months."
However, investment demand for IPOs was solid. According to IRcudus, 14 corporations in the first half posted more than 1,000-to-1 competition in retail subscriptions, accounting for 82% of the total. That was sharply higher than 42% in the first half of last year. The share of corporations with more than 1,000-to-1 competition in institutional bookbuilding was also 59%, maintaining a similar level to last year.
There are projections that IPO supply, which had been subdued, will increase in the second half. In July, a total of four corporations newly listed on the main and KOSDAQ markets, and in August, six corporations—Dealicious, KNSINC, Ingenia Therapeutics, Kido Industrial, Nearthlab, and Haechitech—are slated to list. That exceeds half the total number of new listings in the first half.
Researcher Choi analyzed, "The bookbuilding schedule, which had been weak each month compared with an average year, is recovering quickly in August and September," and "The status of review approvals, which had been weak each month, has also improved noticeably since July, so a second-half market recovery is worth expecting." In fact, 14 corporations conducted bookbuilding between July and September, amounting to half of the 28 in the first half overall.
However, even if supply increases, it is uncertain whether the entire IPO market will revive. That is because the heat in institutional bookbuilding has cooled compared with the first half, and "sorting the wheat from the chaff" has gone into full swing. All six corporations slated to list in August recorded institutional bookbuilding competition below 1,000 to 1.
Yun Cheol-hwan, a researcher at Korea Investment & Securities Co., said, "Despite the numerous schedules in August, investment sentiment weakened in the institutional bookbuilding market due to the recent expansion in stock market volatility, and some issues posted poor lock-up ratios and competition," and noted, "As momentum is expected in the second half from bargain hunting after excessive declines and from KOSDAQ activation policies, it is necessary to sort the wheat from the chaff."