The First Major IPO of the New Year 'LG EnSol' Demand Forecast on 11-12... Market Cap Up to 100 Trillion Won

[Asia Economy Reporter Lee Seon-ae] LG Energy Solution, considered the first major initial public offering (IPO) of the new year, is set to begin demand forecasting among institutional investors. In the securities industry, LG Energy Solution's appropriate market capitalization is estimated to be up to 100 trillion won, making it highly likely that the offering price will be set at the upper end of the desired range of 300,000 won.

According to the financial investment industry on the 9th, LG Energy Solution will conduct demand forecasting for domestic institutional investors on the 11th and 12th of this month to finalize the offering price. The company will then accept subscription applications from general investors on the 18th and 19th, followed by listing on the Korea Exchange on the 27th of this month.

LG Energy Solution plans to offer 42.5 million shares in this IPO. The desired offering price range is 257,000 to 300,000 won. Based on the upper limit of the offering price, the expected amount to be raised is 12.7 trillion won, with an anticipated market capitalization of 70 trillion won. Upon listing, it is expected to surpass Naver and enter the top three in market capitalization on the Korea Exchange.

The securities industry anticipates that the offering price will be set at the upper end of the desired range. The seven joint lead managers have estimated LG Energy Solution's appropriate market capitalization after listing at 112 trillion won, while Korea Investment & Securities and SK Securities have valued it at 100 trillion won.

Yoon Hyuk-jin, a researcher at SK Securities, said, "The comparable company to LG Energy Solution, China's CATL, had an EV (market value)/EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of about 80 times last year, whereas even if LG Energy Solution's market capitalization is set at 100 trillion won, this ratio would be around 43 times," adding, "Considering the risk of interest rate hikes, there is still ample room for price appreciation compared to the offering price."

Han Seung-jae, a researcher at DB Financial Investment, also predicted, "Considering that the offering price band was calculated with a relatively higher discount rate compared to CATL, a price increase relative to the offering price is expected."

Kang Song-cheol, a researcher at Eugene Investment & Securities, explained, "Large IPOs such as SK Bioscience, SK IE Technology, Kakao Bank, Hyundai Heavy Industries, and Kakao Pay, which were listed last year, recorded significant price increases immediately after listing," and added, "Market interest in LG Energy Solution's IPO is also expected to be high."

Stock market funds are also fluctuating. Considering that subscription deposits for Kakao Bank's IPO last year reached 58.3 trillion won, the industry expects LG Energy Solution's subscription deposits to exceed 30 trillion won, even reflecting recent loan regulations. There is also analysis suggesting that the usual 'January effect,' where stock prices generally rise at the beginning of the year, has not been observed due to early tightening concerns and the impact of LG Energy Solution's listing issue.

Son Joo-seop, a researcher at Cape Investment & Securities, explained, "Large IPOs cause a concentration of market supply and demand, leading to price declines in other stocks," adding, "Due to selling pressure on other stocks to secure funds for purchasing LG Energy Solution shares even before listing, there is a high possibility of price declines, especially among large-cap stocks."

After listing, LG Energy Solution is highly likely to be included early in major indices such as the Financial Times Stock Exchange (FTSE), Morgan Stanley Capital International (MSCI), and KOSPI 200. The MSCI index includes companies early if their market capitalization exceeds 6 trillion won and free float market capitalization exceeds 3 trillion won immediately after listing. Early inclusion in the FTSE index is decided based on similar criteria. Special inclusion in the KOSPI 200 is expected on March 10.

Accordingly, rebalancing of domestic and international ETFs tracking these indices and asset reallocation (rebalancing) of secondary battery ETFs are expected. In this case, passive funds worth 1 to 1.5 trillion won will flow in. Demand from active funds anticipating price increases is also expected to concentrate. Researcher Son analyzed, "LG Energy Solution's free float ratio after listing is expected to be determined around 9%, which is likely to cause a shortage of supply due to the low free float ratio."

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