Of the 18 newly listed companies that debuted on the Korean stock market this year, 14 are now trading below their initial public offering (IPO) prices. Although their shares climbed well above IPO prices immediately after listing, they subsequently plunged, in what analysts describe as an intensifying "first-day concentration" phenomenon. With stock market capital concentrated in the semiconductor sector and listing reviews tightened, the IPO market slump is expected to continue for some time.
According to the financial investment industry Sunday, of the 18 general companies newly listed this year, 14 closed below their IPO prices as of July 3. That means nearly 80 percent of the companies saw their shares fall below their offering prices. Only four companies were trading above their IPO prices: Cosmo Robotics, MakinaRocks, RECENS Medical, and Justek.
Madup, which listed on July 1, closed at the same level as its IPO price of 8,000 won on July 2 but slipped to 7,770 won on its third trading day. StradVision, an artificial intelligence (AI)-based autonomous driving software company, plunged 40 percent from its IPO price of 12,000 won on its KOSDAQ debut on June 30, closing at its lower limit of 7,200 won, and later fell to 4,580 won. Piecepiece Studio also traded below its IPO price of 21,500 won on its listing day and dropped to 5,350 won on July 3, about a quarter of its offering price.
The gap between prices immediately after listing and current price trends is also striking. The average opening-price return relative to IPO prices for the 18 companies that debuted in the first half of this year reached 178.7 percent, a record high. Of these, 17 companies, excluding StradVision, began trading at prices above their IPO prices. Four companies — Axvis, IMBiologics, POLED, and MakinaRocks — achieved "quadruple" opening prices, meaning share prices rose to four times their IPO prices. While they posted high returns on their first day of trading, a large number of stocks subsequently fell below their IPO prices as profit-taking flooded the market. Some also view the price weakness as being amplified by insufficient inflows of long-term investment capital, amid a strengthening short-term trading tendency among IPO investors.
Beyond price weakness, the IPO market has also shrunk significantly in size. As of the first half of this year, there were 17 newly listed companies, less than half the number in the same period last year (38). As a result, the offering amount fell from 2.2095 trillion won to 1.1327 trillion won, and the listing market capitalization also declined from 14 trillion won to 7.3593 trillion won, drops of 49 percent and 47 percent, respectively.
Analysts diagnosed that the IPO market has been relatively neglected despite strength in the domestic stock market. Tae Yoon-sun, a researcher at KB Securities, noted, "With capital recently concentrated in some large-cap stocks such as semiconductors, the IPO market has shown a relatively neglected pattern," adding, "The overall IPO market is showing weakness due to issues such as dual-listing regulations and the Korea Exchange's stance of tightening listing reviews."
There are also forecasts that the market will gradually recover in the second half. Not only are more companies filing for preliminary listing reviews with the exchange for second-half listings, but "IPO heavyweights" such as Musinsa and Sono International are also preparing to enter the market.
However, institutional reform is a variable. In the case of dual listing, detailed criteria for allowing exceptions are expected to be announced soon and fully implemented from the end of this month. In addition, as the cornerstone investor system, which passed the National Assembly in April this year, is set to be introduced in the second half, there are considerable concerns that confusion could arise in the IPO market. Some also observe that the introduction of the cornerstone system could work positively for an IPO market recovery, as it would allow companies to stably secure medium- to long-term institutional investors.
