K Bank, OTC Trading Price Drops...Will It Affect Listed Company Value? [IPO Spotlight]

[Image source=Yonhap News]

[Asia Economy Reporter Park Soyeon] K-Bank's stock price plummeted in over-the-counter (OTC) trading. Analysts suggest that the poor stock performance of its comparable company, KakaoBank, is negatively impacting K-Bank's corporate value.

According to the financial investment industry on the 15th, K-Bank was traded at 12,340 KRW per share on the Seoul OTC trading platform for unlisted stocks. This represents a decrease of 660 KRW (5.08%) compared to the previous day's trading price. Based on this stock price, K-Bank's corporate value is estimated at 4.636 trillion KRW.

Until July, K-Bank's shares were traded in the OTC market at around 18,000 KRW per share, corresponding to a corporate value of approximately 6.7 trillion KRW. Although it is OTC trading, this means that over 2 trillion KRW of corporate value has evaporated in just two months.

This decline is analyzed to be correlated with the recent sharp drop in KakaoBank's stock price, a comparable company. KakaoBank's stock price, which surpassed 94,000 KRW last year, fell to the 50,000 KRW range earlier this year and continued to decline, breaking below the 30,000 KRW mark. As of the closing price on the 14th, it stood at 26,250 KRW.

Compared to K-Bank, KakaoBank is about six times larger in terms of cash and deposits and about three times larger in loan size. Reflecting this, a simple calculation values K-Bank's stock price between 4,300 KRW and 7,800 KRW per share.

Within the industry, concerns are growing about K-Bank's chances of a successful listing amid a significantly contracted public offering market and the severe slump in KakaoBank's stock price, a competitor in the same sector. There are calls for a corporate value adjustment, and some even predict that K-Bank may postpone its listing to next year.

K-Bank has expressed its intention to list on the KOSPI this year for several years. This is to strengthen its competitiveness as an internet bank by raising capital and to provide investors with an exit route. When it attracted investors such as Bain Capital, MBK Partners, and MG Saemaeul Geumgo Central Association last year, it also announced plans to pursue a listing by the end of 2022.

K-Bank must succeed in its IPO to enable major financial investors (FIs) to recover their funds. However, if major shareholders and FIs are not satisfied with the market value, K-Bank's IPO could be delayed until next year. K-Bank filed a preliminary review application for listing with the Korea Exchange's KOSPI Market Division on June 30, with a target corporate value of about 6 trillion KRW stated in the application.

Currently, BC Card, a KT affiliate, is the largest shareholder with a 34% stake, and Woori Bank is the second-largest shareholder with 12.6%. Private equity funds Bain Capital and MBK Partners became joint third-largest shareholders by participating in last year's capital increase. The issuance price at that time was set at 6,500 KRW, a 30% premium over the par value. The fifth-largest shareholder, Kanye Limited Liability Company, and the sixth-largest shareholder, JS Shinhan Partners Limited Liability Company (5.16%), are also major FIs. Investors who participated in the capital increase, including the Singapore Investment Corporation and Com2uS, currently hold more than 30% of the total issued shares. BC Card, the largest shareholder, has a contract with FIs to exercise a call option to purchase FI-held shares if the IPO is not completed by 2023.

As of the end of Q2 this year, K-Bank's total capital was 1.73 trillion KRW, reflecting a corporate value in the low 4 trillion KRW range. Considering discount rates, K-Bank is expected to enter the stock market with a valuation of about 3 to 4 trillion KRW. The valuation desired by FIs is much higher. In fact, when K-Bank selected its underwriter earlier this year, a value exceeding 15 trillion KRW was mentioned. The current value investors want is known to be around 7 to 8 trillion KRW.

An investment banking (IB) industry official expressed concern, saying, "If K-Bank's OTC trading price falls below 12,500 KRW per share, there could be problems with the listing."

Meanwhile, K-Bank, launched in April 2017, is Korea's first internet-only bank. If it enters the stock market, it will become the second internet-only bank to be listed domestically.

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