Removing the COVID Curtain... IPO Awakens from Late Slumber

[Asia Economy Reporter Song Hwajeong] Clinical trial contract research organization (CRO) DreamCIS will conduct demand forecasting on the 7th and 8th. This is the first demand forecasting for an initial public offering (IPO) by a general company in over two months since the end of February. Meanwhile, Somagen, the first foreign company to list on KOSDAQ through the technology special case system, postponed its public offering schedule. Accordingly, Somagen's scheduled listing date, originally set for the end of this month, has been pushed back to the 15th of next month.

With a noticeable increase in companies filing for preliminary listing examination recently, there is growing anticipation that a late spring breeze may blow into the IPO market, which had been frozen due to COVID-19. However, some companies are still postponing their listings, leading to forecasts that a full recovery of the IPO market will take more time.

According to the Korea Exchange on the 7th, 21 companies filed for preliminary listing examination in April. This is a significant increase compared to 5 companies in February and 4 in March.

This month, demand forecasting and new listings will resume. DreamCIS will conduct demand forecasting for institutional investors over two days starting today, followed by public subscription on the 12th and 13th, and is expected to enter the KOSDAQ market on the 22nd. This is the first demand forecasting for a general company since NPD on February 25-26. With DreamCIS's listing, the entry of new companies into the stock market, which was absent last month, will resume this month.

Lee Sojung, a researcher at SK Securities, said, "From mid-April, as the number of domestic COVID-19 cases decreased and the stock market rebounded, many companies completed their filing submissions," adding, "Companies that have already received examination approval have started holding investor briefings." Lee added, "Considering the significant increase in the number of companies filing despite the uncertainties caused by COVID-19 in April, the level is expected to remain high in May."

The IPO market experienced severe stagnation in March and April, with zero new listings in April due to the COVID-19 situation. Demand forecasting was absent for two consecutive months in March and April. Choi Jongkyung, a researcher at Heungkuk Securities, said, "A peculiar phenomenon occurred where companies planning to conduct demand forecasting for public offerings in March and April withdrew their offerings one after another, resulting in zero demand forecasting for two consecutive months," adding, "Even considering that April is an off-season due to schedule variables, the change from 7 planned to 7 withdrawn offerings in March and April can only be explained by COVID-19."

However, with the recovery of preliminary examination filings to normal levels from April, the IPO market is expected to regain vitality in the second half of the year. Researcher Choi said, "Although the number of filings in March was low compared to the average, it increased significantly in April compared to the previous month, recovering to average levels," and added, "Considering that it typically takes about four months from filing to conducting demand forecasting, the current filing trend is very hopeful."

Although the market is gradually stretching its limbs, the IPO market contraction is expected to continue through the second quarter. Park Jongseon, a researcher at Eugene Investment & Securities, said, "The number of companies listed in the second quarter over the past two years was 18 and 20 respectively," and diagnosed, "It is almost certain that the second quarter this year will decrease compared to the same period in the past two years." Park forecasted the number of IPO companies in the second quarter to be in the low teens, explaining, "There are currently two companies in progress, five companies that postponed their listing schedules, and others waiting after approval." The amount raised in the second quarter is expected to be around 300 billion KRW, lower than the average of the past two years. The amount raised in the second quarter over the past two years was 327.5 billion KRW and 385.7 billion KRW respectively.

Active IPOs of non-face-to-face related stocks, which have attracted attention due to COVID-19, are expected. The researcher said, "The number of IPOs by non-face-to-face companies, which can be valued higher than before due to improved performance from increased demand for non-face-to-face services, will increase." A representative example is the e-commerce company TMON, which recorded its first monthly profit in 10 years in March this year. TMON selected Mirae Asset Daewoo as the lead underwriter at the end of last month and started the IPO process. KakaoBank, a specialized non-face-to-face financial service company, saw a 25% increase in customers in the first quarter compared to the same period last year due to the impact of COVID-19. KakaoBank is known to have started practical work for an IPO in the second half of this year. In addition, many non-face-to-face related companies such as AimSystem, a smart factory solution specialist, and Ivy Kim Young, engaged in online education, have filed for preliminary listing examination since April.

As the IPO market is expected to gradually recover, securities firms are responding quickly. Due to the decrease in fee income related to the contraction of the IPO market, a decline in the performance of securities firms' investment banking (IB) divisions is inevitable. Accordingly, competition to secure underwriting work for listings is intensifying. An industry insider said, "Securities firms have been actively moving recently to attract IPO listings," adding, "They will try to boost their IB performance, which has declined, through aggressive IPO underwriting."

This content was produced with the assistance of AI translation services.