Forced Listing of WCP, FI's 'Mixed Feelings'... Majority in Loss Zone

Previous value 2.3 trillion, expected market cap 2.0218 trillion
Potential losses from early FIs like No & Partners and DS Asset Management

[Asia Economy Reporter Kwangho Lee] WCP, a specialist company in secondary battery separators, is accelerating its initial public offering (IPO), drawing attention to the exit performance of financial investors (FIs). Although it was considered a major player in the materials, parts, and equipment (SoBuJang) sector with a market value in the trillion-won range, it is expected to face challenges due to the sluggish market conditions.

WCP will conduct a general subscription over two days, from the 20th to the 21st, through KB Securities, Shinhan Financial Investment, and Samsung Securities. Following the institutional demand forecast conducted over two days from the 14th to the 15th, the public offering price was set at 60,000 KRW, which is lower than the initially hoped range of 80,000 to 100,000 KRW. The total number of shares offered is 7.2 million, with the total offering amounting to 432 billion KRW based on the fixed price. The scheduled listing date is the 30th of this month.

With the offering price lowered to 60,000 KRW, the market capitalization, which was expected to reach up to 3.401 trillion KRW, has decreased to 2.0218 trillion KRW. Despite most institutional investors participating with actual demand due to concerns about the sluggish IPO market and overallotment, a total of 759 domestic and international institutions participated in the demand forecast, resulting in a low competition rate of 33.28 to 1.

No & Partners Withdraws Old Share Sale, Leading to Reduced Offering Volume

Due to the poor demand forecast, WCP reduced the offering volume by 20%, from the original 9 million shares to 7.2 million shares. Consequently, the funds raised through this IPO were halved. Initially, the plan was to raise between 720 billion and 900 billion KRW, but with the reduction in both the offering price and volume, the amount decreased to 432 billion KRW.

The reduction in offering volume is linked to a major FI, No & Partners. They had planned to sell 25% (1,486,820 shares) of their holdings acquired through a private equity fund, but decided not to proceed with the sale of old shares as the offering price fell below expectations. Essentially, this postponed their exit plan.

No & Partners is a growth partner of WCP. Led by CEO No Gwang-geun, a former official of the Korea Development Bank, No & Partners invested 149 billion KRW in convertible bonds (CB) issued by WCP in December 2019. Although various FIs participated afterward, none surpassed No & Partners' investment amount. In September last year, after converting the CBs held into common shares and selling some shares, their stake decreased from 32% to 21%.

Until now, No & Partners held WCP shares through funds such as NP Growth No.6 Private Equity Partnership, 2019 PCC Materials and Parts Investment Association, and CSSF Investment Association. About 25% of the shares held by these funds were subject to old share sales, but with No & Partners' changed calculations, the immediate exit performance remains uncertain.

2.5 Trillion KRW Valuation Investment: No & Partners, KDB, Samsung Ventures, etc. ‘In the Money’

However, the performance of FIs who took on the common shares previously held by No & Partners can be somewhat gauged. At the time of the common share sale, WCP's valuation was known to be around 2.3 trillion KRW. From that point, FIs who invested later faced unavoidable losses.

WCP has attracted investment in four major rounds. In December 2019, initial investors included ▲No & Partners (149 billion KRW) ▲Korea Development Bank (KDB) (25 billion KRW) ▲Samsung Venture Investment (20 billion KRW) ▲BNW Investment (10 billion KRW) ▲Shinhan Financial Investment (5 billion KRW) ▲Shinhan Capital (4 billion KRW). The valuation at that time was about 250 billion KRW.

KDB realized profits by selling all its shares to WCP's Kiwoom Capital in August 2021 by exercising preemptive rights. At that time, the valuation had sharply increased to 1.4 trillion KRW compared to before.

Following No & Partners' sale of its holdings, new FIs such as ▲DS Asset Management (70 billion KRW), Samsung Securities-Hanwha Investment Securities (88 billion KRW), ▲KB Securities (40 billion KRW), ▲Timefolio Asset Management (30 billion KRW), and ▲Global One Asset Management (12 billion KRW) joined. Halla Holdings also invested 100 billion KRW. The valuation recognized by these investors was 2.3 trillion KRW.

2.3 Trillion KRW Valuation Investment: DS Asset Management, Samsung Securities-Hanwha Investment Securities, KB Securities, Halla Holdings, etc. ‘Red Light’

As a result, FIs investing after Kiwoom Capital in August 2021 are inevitably facing losses. No & Partners, KDB, Samsung Venture Investment, BNW Investment, Shinhan Financial Investment, Shinhan Capital, and Kiwoom Capital remain in profit, but later-stage FIs including DS Asset Management must accept a market capitalization lower than the valuation at the time of their investment.

When the market capitalization was expected to be between 2.8 trillion and 3.4 trillion KRW based on the offering price, there was no need to worry about exit strategies. However, with the recent market capitalization after listing coming out to about 2.0218 trillion KRW based on the offering price, the company value has decreased compared to when they invested, making a successful exit unlikely.

An investment banking industry official said, “Even with a conservative approach, WCP’s valuation was around 2.7 trillion KRW. As a major SoBuJang company, everyone expected a successful IPO, but it seems difficult to avoid the tough market conditions.” He added, “However, WCP’s growth potential remains, so mid- to long-term investment could be considered.”

Founded in 2016, WCP is a specialized company developing and producing secondary battery separators used in electric vehicle batteries. Its main product is the 2nd generation coated wet separator. The headquarters and factory are located in Chungju, Chungcheongbuk-do. The largest shareholder is W-Scope Corporation, listed on the Tokyo Stock Exchange.

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