SK Riding the Wave from SK Biopharm... Record-Breaking Individual Buying Frenzy

Investor sentiment unable to absorb IPO shares spreads to SK Group stocks
SK Group holding company SK sees 580 billion KRW net purchases by individuals this month
Tenfold increase compared to Jan-Apr... Foreigners also bought 290 billion KRW
SK Chemicals hits 52-week high amid rising COVID-19 vaccine expectations

[Asia Economy reporters Minwoo Lee and Hyeonggwang Ko] SK Group continues to receive positive momentum. Its subsidiary SK Biopharm, which is set to go public next month, is drawing huge attention by setting a record-breaking subscription, and the investment enthusiasm that could not be absorbed by the public offering shares seems to be spilling over to the holding company SK as well. In addition, several group affiliates, including SK Chemicals, are showing rising stock prices, hitting new highs.

According to the Korea Exchange on the 26th, individual investors have net purchased SK shares, the holding company of SK Group, worth a total of 578.9 billion KRW from the beginning of this month through the 25th. This is more than double the net purchase amount of 249.9 billion KRW in the previous month. Monthly net purchases had been around 30 to 50 billion KRW this year, but buying momentum from individuals started to surge from last month when the SK Biopharm IPO became visible. On the 24th, the final day of SK Biopharm’s public subscription, individual net purchases reached 181.9 billion KRW, the largest in the past five years. Foreign investors also bought 293.2 billion KRW worth of shares that day, about twice as much as Samsung Electronics (150.2 billion KRW), the leading stock in the domestic market. This is the largest scale since June 27, 2014, when 381.2 billion KRW was net purchased.

The surge in investor sentiment is believed to be driven by expectations of SK Biopharm’s successful IPO. SK Biopharm, scheduled to be listed on the KOSPI on the 2nd of next month, completed its general public subscription on the 23rd and 24th, setting a record-breaking milestone. The total subscription deposit reached 30.9899 trillion KRW, breaking the previous record of 30.0649 trillion KRW set by Cheil Industries in 2014. The subscription competition rate also surpassed Cheil Industries. For 3,915,662 shares available for general subscription, a total of 1,264,853,070 subscription applications were received, resulting in a competition rate of 323.02 to 1. This far exceeded Cheil Industries’ competition rate of 194.9 to 1, which had 5,749,990 shares offered and 1,120,573,920 subscription applications.

Although SK Biopharm’s IPO is on a successful track, the relatively small number of circulating shares means that the overflowing investor sentiment has flowed into the holding company SK as well. The circulating share ratio, excluding shares held by SK Biopharm’s largest shareholders, related parties, and employee stock ownership associations, is expected to be about 20%. Among these, most institutional shares are subject to lock-up agreements (protective custody) that prevent selling for a certain period after listing, so the actual circulating shares in the early stages of listing are expected to be only about 5%. Jungwook Choi, a researcher at Hana Financial Investment, explained, “The corporate value is estimated to be at least 6.1 trillion KRW, but based on the public offering price range, the corporate value is only about 2.8 to 3.8 trillion KRW, so investor interest is naturally high. Since the circulating shares are expected to be about 5% due to lock-up, the supply-demand effect of SK Biopharm inevitably transfers to SK, which holds SK Biopharm shares.”

Other SK Group companies such as SK Innovation (7%), SKC Solmix (27.9%), and SK Discovery (6.72%) are also seeing rising stock prices. In particular, SK Chemicals rose 11.2% to close at 114,000 KRW on the previous day when the KOSPI index fell more than 2%. It hit a 52-week high and rose more than 17% just this week. Compared to the year-end price of 64,000 KRW last year, it surged 78.1%. It is also close to the all-time high of 122,000 KRW recorded shortly after its listing in January 2018. In the past week, foreign and institutional investors have net purchased 10.3 billion KRW and 16 billion KRW respectively, driving the stock price up.

Stock prices are gaining momentum not only due to expectations for SK Biopharm but also because of hopes for the development of a COVID-19 vaccine. SK Bioscience, a subsidiary of SK Chemicals, was selected as the preferred negotiation partner for the COVID-19 vaccine development project by the Korea Disease Control and Prevention Agency in March and recently succeeded in expressing a candidate substance for the COVID-19 vaccine, entering full-scale preclinical trials. Taegi Ha, a researcher at Sangsangin Securities, said, “The value of SK Chemicals’ subsidiary’s vaccine business is greatly increasing. In addition, if announcements such as phase 2 clinical trials for pneumococcal vaccines or license agreements for flu vaccines are made, another stock price rise is possible.”

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