[IPO] Younglimwon Soft Lab Overcomes the 80% Mark... "Overhang Volume Is a Burden"

[Asia Economy Reporter Hyunseok Yoo] Younglimwon Soft Lab's IPO price was set at the upper end of the desired price range, marking a significant milestone in its initial public offering (IPO) process. Only the public subscription for general investors remains. However, concerns persist due to the relatively small proportion of its cloud business and the large overhang (massive pending sell orders) expected after listing.

According to the financial investment industry on the 31st, Younglimwon Soft Lab's IPO price was finalized at 11,500 KRW. This is the upper limit of the desired price range (9,500 to 11,500 KRW). A total of 1,352 institutions participated, recording a competition rate of 1,269.3 to 1.

By price range, 22.4% of institutions offered prices exceeding 12,000 KRW, 25.7% offered prices between 11,500 KRW and 12,000 KRW, and 14.7% concentrated at the upper limit of 11,500 KRW. A company official explained, "During the Non-Deal Roadshow (NDR), we emphasized the potential of ERP, contactless (untact) services, and global expansion, which seems to have been persuasive."

Founded in 1993, Younglimwon Soft Lab primarily develops and sells ERP (Enterprise Resource Planning) platforms. It builds ERP platforms tailored to corporate environments and supports system maintenance and management through continuous upgrades. Last year, the company recorded sales of 37.9 billion KRW and an operating profit of 4.2 billion KRW.

Although Younglimwon Soft Lab is preparing for public subscription and listing, some concerns remain regarding its cloud sector. Compared to competitors, the cloud business accounts for a small portion of sales and shows slower growth, making it uncertain. For example, Duzon Bizon, a directly comparable competitor, has been developing its cloud business since early 2010. Its D Cloud sales were 47.8 billion KRW in 2017, 52.6 billion KRW in 2018, and 58 billion KRW last year. In the first quarter of this year, it recorded 14.8 billion KRW in sales, with cloud accounting for 20% of total sales. In contrast, Younglimwon Soft Lab's cloud sales were 700 million KRW in 2017, 900 million KRW in 2018, and 1.1 billion KRW last year. The first quarter sales were only 300 million KRW, with cloud making up about 3% of total sales, placing it at a disadvantage compared to Duzon Bizon.

A financial investment industry official said, "Duzon Bizon received a high valuation as its cloud sales grew and profit margins improved. Younglimwon Soft Lab's cloud proportion is small, and while future trends need to be observed, there currently seems to be little room for profit margin improvement."

The overhang volume is also a burden. Generally, the volume released immediately after listing is about 40-50% of total shares, but Younglimwon Soft Lab's volume reaches 60%. The total number of shares scheduled for listing is 8,131,000. Among these, shares with trading restrictions include CEO Kwon Youngbeom (13.97%), 15 others including Kwon Orim (490,520 shares), 3 others including Han Suyeon (10.74%), employee stock ownership (7.77%), and Mirae Asset Daewoo (0.63%), totaling 39.14%. Excluding these, the remaining 60.86%?held by KCC Information & Communication (9.35%), Food & Gallery (5.55%), Aju IB Investment (5.47%), SysOne (4.03%), employee stock ownership association (1.77%), 64 individuals including Lee Seongho (14.82%), and public shareholders (19.86%)?can be immediately released upon listing. This is influenced by a high proportion of financial investors and small shareholders. However, this volume may change if institutional investors agree to lock-up agreements in the future.

In fact, companies that directly listed this year such as MTI (38.56%), The Nature Holdings (53.30%), Saltlux (40.64%), Apro (45.59%), Seondo Giyun (37.05%), Withus Pharmaceutical (21.39%), and SK Biopharm (20%) mostly had overhangs between 20-50%.

Overhang is a factor that suppresses stock price rises. If a large volume of sell orders floods the market on the listing day, it can burden the stock price. The official said, "Many people think there will be a large circulating volume after listing, which is likely to weigh on the stock price."

On the other hand, the company explains that the overhang volume will not be large immediately. A company official emphasized, "Among the 60% of shares expected to be overhang, most belong to strategic partners who have been with us for 20 years. We realistically expect only about 20% of the volume to be released."

Meanwhile, Younglimwon Soft Lab plans to conduct public subscription for general investors on the 3rd and 4th of next month and list on the KOSDAQ market on the 12th of the same month.

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