[Initial Insight] Is the First Day of IPO Market Listing a Speculation Arena?

IPO investors are quick to sell and leave on the first day of a rookie stock's listing. While prospective listed companies promote their competitiveness and growth strategies as they prepare to enter the stock market, it is not easy to find long-term investors in the initial public offering (IPO) market. Although regulatory authorities have introduced various measures this year to enhance the soundness of the IPO market, it is still difficult to feel their effects.

Since June 26, the regulatory authorities have expanded the price fluctuation range of rookie stocks on the first day of listing to 60-400% of the offering price. This measure is explained as an effort to facilitate early discovery of the appropriate price for newly listed companies. The revised model guidelines for lead underwriting duties have been implemented since July. The demand forecasting period has been extended from the previous 2 business days to 5 business days. Lead managers are verifying the payment capabilities of institutional investors participating in demand forecasting. It is expected to prevent fictitious subscriptions and restore trust.

It is certain that fictitious orders have decreased in demand forecasting. The problem is that if asked whether anything has changed because of this, one can only shake their head. The biggest reason is the expanded fluctuation range on the listing day. As speculative funds aiming for short-term profits flood in, the IPO subscription market is bustling, but after a month passes from listing, the stock price decline becomes evident.

Since the beginning of this month, tens of trillions of won in market funds have poured into the IPO market. The total subscription deposits for six companies, including Doosan Robotics, Inwave Systems, Millie's Library, IMT, Hanssak, and Revu Corporation, which proceeded to IPO subscription after demand forecasting, reached 44.6 trillion won. All six prospective listed companies confirmed their offering prices above the upper limit of the expected price range during demand forecasting.

Although the competition rate has decreased compared to before verifying payment capabilities, the proportion of companies confirming the offering price at the upper limit of the expected range remains largely unchanged. All six companies that proceeded to IPO subscription confirmed their offering prices above the upper limit of the expected price range during demand forecasting. Doosan Robotics, considered the biggest IPO this year, recorded a demand forecasting competition rate of 272 to 1. Considering that previously a competition rate exceeding 1000 to 1 was regarded as a successful hype, Doosan Robotics' competition rate is modest. Nevertheless, the lead underwriters and Doosan Robotics confirmed the offering price at 26,000 won, the upper limit of the expected price range.

In the end, while they succeeded in preventing fictitious subscriptions and lowering the demand forecasting competition rate, it is uncertain whether this has been effective in calculating an appropriate offering price. Since the beginning of this month, concerns about inflation have resurfaced, causing the domestic stock market to underperform. As a result, funds have increasingly concentrated on IPO subscriptions with higher expected returns due to the expanded fluctuation range on the first day of listing.

What goes up must come down. If the phenomenon of rookie listed companies' stock prices falling below the offering price after one month becomes entrenched, it will inevitably affect the flow on the first day of listing. There is a high risk that the first day will turn into a speculative playground for speculative funds. Among rookies entering the domestic stock market after the implementation of the fluctuation range expansion system, only a handful have stock prices higher one month after listing than at the initial listing. Once the new listing effect disappears, it has become almost a rule that stock prices retreat. This is a result that makes it difficult to say that not only soundness has been enhanced but also the function of early discovery of appropriate prices is working properly.

If Doosan Robotics' stock price steadily follows an upward curve after listing, major IPO candidates that have postponed their listings since the second half of last year may begin their listing processes in earnest. Conversely, if the stock price shines briefly at the beginning of listing but then slides, investor sentiment in the IPO market may rather contract.

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