Record-breaking investment frenzy, last year's IPO public offering amount surged 334%... Subscription deposit alone 784 trillion won

[Asia Economy Reporter Lee Jung-yoon] Last year, the amount raised through initial public offerings (IPOs) in the domestic stock market reached a record high of 19.7 trillion KRW, marking a 333.9% increase compared to the previous year. Subscription deposits surged to 784 trillion KRW, more than doubling from the year before.

According to the "2021 IPO Market Trend Analysis" released by the Financial Supervisory Service (FSS) on the 7th, the number of IPO companies last year increased by 27.1% to 89, and the IPO offering amount skyrocketed nearly 334% (almost 20 times) from 4.5 trillion KRW to 19.7 trillion KRW.

In last year’s IPO market, the number of institutions participating in demand forecasting and the demand forecast competition rate continuously increased. As a result, the proportion of offerings priced above the upper limit of the price band rose from 80% in 2020 to 86.5% last year.

With the surge in enthusiasm for public offering stocks, competition among institutional investors intensified, and the proportion of lock-up commitments significantly increased from 19.5% to 33.6%. An analysis of 49 companies, whose securities registration forms were revised in June last year to include allocation details by type of institutional investor, showed that fund management companies accounted for the largest share at 55%, followed by others such as savings banks at 17%, and foreigners at 16.5%. Pension funds and banks were allocated 8.8%, and investment trading and brokerage firms 2.6%. Among the foreign allocation, the lock-up commitment ratio was 9.8%, showing a difference compared to 37.8% for domestic institutions. An FSS official stated, "Although participation is voluntary, foreigners need to participate for the IPO market to be active, so consideration has been given since the past."

The subscription competition rate among general investors recorded 1,136 to 1. The FSS analyzed that "interest in public offering stocks increased as stock prices continuously rose from mid-2020 and large-scale IPOs such as Krafton (4.3 trillion KRW) appeared." Subscription deposits more than doubled to 784 trillion KRW.

After IPO listing, the concentration of gains on the listing day was notable. The closing price yield on the listing day compared to the offering price was recorded at an average of 57.4%, the highest level in the past five years. Previously, it was 28.6% in 2017, 34.5% in 2018, 27.5% in 2019, and 56.9% in 2020.

Fifteen companies, including SK Bioscience, saw their newly listed stocks open at twice the offering price on the first trading day and close at the price limit of 30%, a so-called "ttasang" case, which continued to increase. On the other hand, 15 companies such as Geninus experienced a decline in closing price compared to the offering price on the listing day, showing a polarization phenomenon.

The proportion of special listings due to technological growth and other reasons also continued to increase. The proportion of special listings among KOSDAQ IPOs was 30% in 2018, 40% in 2020, and 48% last year. In particular, investor interest in new technologies such as metaverse and NFT (non-fungible tokens) increased, and the proportion of IT companies among special listing companies rose to 11, showing an upward trend. Conversely, special listings in the bio sector decreased from 16 companies in 2020 to 10 last year.

The FSS plans to enhance disclosure quality to ensure that industry trends, risk factors, business models, and plans are systematically described in securities registration forms, anticipating an increase in metaverse-related IPOs.

Additionally, regarding IPOs of special listing companies, the FSS will conduct thorough reviews of detailed technology evaluation contents recorded in securities registration forms, growth potential evaluation grounds by lead managers, and focus on assessing the appropriateness of future profit estimation bases related to pricing. Furthermore, to improve the quality of IPO underwriting, the FSS will jointly conduct evaluations of lead managers’ underwriting operations with the Korea Financial Investment Association.

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