[Missing IPO Giants]② No Appearance of Large-Scale Listed Companies in Q2 Either

Liquidity Shortage in Capital Markets Due to Interest Rate Hikes
Aftermath of Overvaluation from Unlisted Company Investment Boom

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Since the listing of double WCP, a secondary battery separator manufacturer, on September 30 last year, no blockbuster IPOs with a corporate value exceeding 1 trillion won have emerged in the domestic IPO market. Although the IPO market has been buoyed by the unexpectedly successful performance of small and mid-sized IPOs this year, the prevailing analysis is that it is premature for blockbuster IPOs to appear. The stock market has been sluggish due to central banks around the world raising benchmark interest rates one after another to curb rapidly rising inflation, significantly reducing liquidity in the capital market. Moreover, the enthusiasm for investing in unlisted stocks was intense until the first half of last year, resulting in a backlash of increased burden on the public offering price. When receiving investments from financial investors (FIs), companies usually make promises regarding corporate value and listing timing, but given the recent stock market situation, it is inevitably difficult to keep these promises.

According to the financial investment industry on the 18th, there are expected to be no blockbuster IPOs (with an estimated corporate value of over 1 trillion won) listed on the domestic stock market in the second quarter of this year. Among the companies expected to be listed in the second quarter, the company with the largest estimated market capitalization is Gigavis. Gigavis and its underwriter, Samsung Securities, have proposed a public offering price range of 34,400 to 39,700 won. Based on this, the market capitalization is around 500 billion won.

Blockbusters Achieving Strong Performance Last Year, Deliberating Optimal Listing Timing

Even when expanding the scope to companies that have filed for listing review, blockbuster IPOs that had raised expectations have yet to proceed with full listing procedures. Blockbuster IPOs approved last year must reapply for review if they want to list after six months.

Among the blockbuster IPOs expected to list this year, LG CNS, SK Ecoplant, CJ Olive Young, and Ecopro Materials may list as early as the third quarter depending on market conditions.

LG CNS selected KB Securities, Bank of America (BoA), and Morgan Stanley as lead IPO underwriters in May last year. Mirae Asset Securities, Shinhan Investment Corp., Daishin Securities, and JP Morgan also serve as joint underwriters. Last year, LG CNS recorded sales of 4.9697 trillion won, operating profit of 385.4 billion won, and net profit of 265 billion won, representing increases of 19.9%, 17.3%, and 12.8% respectively compared to the previous year.

With improving performance and the conditions of its holding company LG, the likelihood of actively proceeding with the listing process has increased. On the 12th, UK-based investment firm Silchester International Investors LLP disclosed that it holds a 5.02% stake (7,896,588 shares) in LG. The financial investment industry expects Silchester to demand dividend expansion, disposal of non-operating assets, and governance improvements. It may also request LG CNS’s listing and cash acquisition through some secondary share sales. LG and LG Group Chairman Koo Kwang-mo hold 49.95% and 1.12% stakes in LG CNS, respectively. An LG CNS official said, "The listing timing will be decided later depending on market conditions and other circumstances."

On the 28th of last month, LG CNS newly appointed Hong Beom-sik, head of LG’s Corporate Strategy Division (President), as an outside non-executive director. The investment banking industry is paying attention to the fact that the head of LG’s Corporate Strategy Division, who formulates overall group management strategies and manages future investments and business portfolios, has joined the LG CNS board. The fact that LG CNS is coordinating its listing timing means it can proceed with an IPO whenever it can secure the desired corporate value. If the group can create a solid growth blueprint for LG CNS and persuade investors, the listing timing could be brought forward.

SK Ecoplant and CJ Olive Young have attracted market attention by recording strong performances last year. SK Ecoplant, a construction affiliate of SK Group, signed contracts with NH Investment & Securities, Credit Suisse (CS) Securities, and Citigroup Global Markets Securities as listing underwriters in April last year. Samsung Securities and Korea Investment & Securities also participate as joint underwriters. SK Ecoplant recorded sales of 7.5509 trillion won and operating profit of 156.9 billion won last year, increases of 21.39% and 6.45% respectively compared to the previous year. Rapid growth in new business sectors such as environment and energy led the overall operating profit increase.

Olive Young achieved sales of 2.7809 trillion won and operating profit of 271.4 billion won last year, increases of 30% and 97% respectively compared to the previous year. Although listing prospects emerged in the second half of last year, the IPO market downturn has delayed the process.

Ecopro Materials, a subsidiary of Ecopro, will submit a preliminary listing review application to the Korea Exchange at the end of this month to enter the KOSPI market. Mirae Asset Securities and NH Investment & Securities have been selected as underwriters. Considering the time required from passing the preliminary review to public offering and actual listing, it is expected to list in the second half of this year. Ecopro Materials manufactures high-nickel precursors, a core material for high-nickel cathodes used in secondary batteries. Last year, its sales and operating profit increased by 94% and 140% respectively compared to the previous year.

Pre-Listing Investors Expect a Certain Level or Higher Public Offering Price

Among blockbuster IPOs, many have indefinitely postponed their listings. Market Kurly has temporarily delayed its IPO and is seeking investment to secure funds for new businesses. It is negotiating to secure 100 billion won through a paid-in capital increase with existing investors, including the management participation private equity fund (PEF) operator Anchor Private Equity (PE). If Market Kurly raises funds, the listing timing is likely to be delayed.

Blockbuster IPOs that have rapidly expanded their size in a short period, including Market Kurly, inevitably have to consider investors’ perspectives during the listing process. It is common to include a Qualified IPO (QIPO) clause in contracts when receiving investments. They promise certain returns and listing timing to investors. Until last year, unlisted companies received investments at high corporate values due to abundant liquidity. In other words, the benchmark guaranteeing a certain return was high. Even if management wants to list by lowering the public offering price to get listed first and then receive a proper corporate valuation later, if investors do not agree, the listing must be postponed.

An IB industry official explained, "Private equity funds sometimes require a certain level or higher public offering price considering the internal rate of return (IRR) when investing in unlisted companies," adding, "Because of this, cases of delaying listings when large growth stocks are unlikely to receive high public offering prices have increased."

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