Controversy Over SKIET's IPO Overvaluation... Is 40 Trillion Won Valuation of KakaoBank Also Inflated?

SKIET Plunge Background: "Overly High Corporate Value, Lost Stock Price Momentum"
"Big IPOs Like K-Bank, Cafe, Krafton Cannot Avoid High Valuation Controversy"

[Asia Economy Reporter Lee Seon-ae] -29.8%. This is the decline rate of SK IE Technology (SKIET) compared to the opening price (210,000 KRW) on the first day of listing, the 11th, and the closing price (147,500 KRW) on the 12th, the following day. SKIET, which made new history in the domestic public offering market with the largest subscription deposit ever, is facing controversy over overvaluation of the public offering price as it not only failed to achieve "ttasang" (a phenomenon where the opening price is formed at twice the public offering price and then soars to the upper limit) but also plunged sharply like this.

◆The "ttasang" public offering party is over= According to the Korea Exchange on the 13th, SKIET is the only company that failed to achieve "ttasang" amid the public offering frenzy continuing since last year. The background factor is that investors were unsettled by the failure of "ttasang" and released a large volume of shares at once. Additionally, the timing was also a factor as it was listed the day after the KOSPI index hit an all-time high, encountering the obstacle of index adjustment. However, the general view is the controversy over overvaluation of the public offering price. As of the 12th, SKIET's market capitalization is 10.5164 trillion KRW, which is still higher than the corporate value of 9.3094 trillion KRW presented in the pre-listing prospectus.

Accordingly, the criticism that the public offering price already sufficiently reflected the corporate value and that there was a lack of momentum for stock price increase is gaining strength. Kim Hyun-soo, a researcher at Hana Financial Investment, explained, "The key to the stock price outlook of SKIET, a separator manufacturer, is the appropriate multiple level. Since the price-earnings ratios (PER) of secondary battery material companies are widely distributed from 40 to 120 times, SKIET's appropriate value can vary greatly depending on whether it can receive a premium compared to other companies."

The target price or appropriate price of SKIET suggested by securities companies differs significantly from the "ttasang" price of 273,000 KRW. Meritz Securities suggested a target price of 180,000 KRW, Hana Financial Investment 148,000 KRW, and Yuanta Securities saw the appropriate price up to 160,000 KRW.

A securities company official pointed out, "When calculating the public offering price band, the upper limit of the public offering price assumes the maximum value given to the company. It was only the liquidity power that continued the 'ttasang' march so far. Looking at the sharp drop in stock price after 'ttasang' due to high valuation controversy, the bubble controversy is inevitable."

◆Bubble controversy over Kakao Bank, Kakao Pay, and Krafton= The market's attention naturally turns to the big fish preparing for listing. Especially, investors' interest in Kakao Bank is high. The corporate value of Kakao Bank as viewed by the market is about 30 trillion KRW. Considering that the value was about 9.3 trillion KRW when a foreign private equity fund participated in December last year, it has risen significantly. Based on the trading price of over-the-counter stocks, the total value exceeds 35 trillion KRW. As of the 12th, the corporate value evaluation amount granted by the Seoul Exchange, an unlisted stock trading platform, reaches a whopping 42.7 trillion KRW.

Even considering future high growth and high profitability, it is evaluated that a considerable premium has already been formed from the perspective of existing financial stocks. While the price-to-book ratio (PBR) of the banking sector is 0.4 times, Kakao Bank's is 4 to 6 times (based on this year's expected total capital). This valuation level is difficult to justify with the traditional financial stocks' return on equity (ROE) and PBR. Even assuming an expected ROE of 15% (expected in 2030), the implied cost of equity (Implied COE) embedded in the PBR value of 4 to 5 times is only 3 to 4%. Researchers Sung Jong-hwa and Jeon Bae-seung of Ebest Investment & Securities analyzed, "Considering the risk-free rate (government bond yield) and risk premium level, Kakao Bank is receiving a high multiple of 53 times compared to the expected net profit in 2025 and 15 times compared to 2030, which is theoretically difficult to calculate with low capital cost and PER."

However, if Kakao Bank reflects platform corporate value rather than financial stock, the valuation can exceed 20 trillion KRW. These researchers explained, "If a 50% multiple premium is applied to Kakao Bank compared to Naver Pay, the corporate value is 20.6 trillion KRW, and if all customers are assumed as monthly active users (MAU) and a 100% premium is applied, the expected value rises to 27.5 trillion KRW." They added, "Ultimately, whether Kakao Bank succeeds as a financial platform, breaking away from the existing financial business model, will determine the valuation level. Justification of valuation higher than commercial banks is possible only when rapid market share expansion and profitability improvement accompany dominance within the financial sector due to sustained high growth."

There are also criticisms that Kakao Pay's valuation is excessive. NH Investment & Securities and Kyobo Securities estimated Kakao Pay's corporate value at 10.3 trillion KRW, and SK Securities at 10.7 trillion KRW. Fintech companies calculate corporate value by applying a 0.1 multiple to expected transaction volume. Kakao Pay's transaction volume last year was 67 trillion KRW, and this year it is expected to approach 100 trillion KRW. Accordingly, applying 0.1 times to 100 trillion KRW results in a figure of 10 trillion KRW. However, Kakao Pay itself seems to be aiming for up to 16 trillion KRW. This is based on the number exposed when Kakao Pay made a mistake by revealing the expected public offering amount and desired public offering price while filing for preliminary review for listing on the KOSPI market.

Concerns have also been raised about Krafton, which is expected to enter the market earlier than these. According to the Seoul Exchange, Krafton's current corporate value is 25.41 trillion KRW, higher than the market capitalizations of NCSoft and Netmarble, which are 18 trillion KRW and 10 trillion KRW respectively. A securities company official pointed out, "Krafton, which had sales of 1.2925 trillion KRW last year, is valued more than 7 trillion KRW higher than NCSoft, which achieved sales of 2.4162 trillion KRW."

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