Expectation for end of interest hikes and IPO market reform to boost slowed listing activities

The initial public offering pipeline for the second half of the year appears to be strong, with high-profile companies, including a fabless chip startup and a battery material maker, pushing for their listings on the Korean stock market to raise equity capital amid relaxed IPO rules.

The IPO market here remained sluggish in the first half of the year due to deteriorating investor sentiment on the local stock market. Proceeds from IPOs were down as only small and medium-sized firms went public amid the volatile stock market and rising interest rates. Firms such as gourmet food delivery platform Kurly pushed back their IPO plan as the company's valuation tumbled.

However, the local stock market appears to have hit a turning point with bullish investors and relaxed rules.

The stock market has been performing well in recent weeks, with firms in the secondary battery industry leading the investment craze, including Posco Group on the country’s main bourse, Kospi, and the EcoPro affiliates on the secondary bourse, Kosdaq.

Relaxed regulations on IPOs are also expected to boost the market. In June, financial authorities raised the limit of the quotation price for newly-issued stocks to a range from 63-260 percent to 60-400 percent of the price that was initially offered on the first trading day, meaning that the prices can quadruple in a single day.

"In the latter half of 2023, the IPO market is expected to perform better as firms backed by high interests from investors are likely to go public and the government has enforced reforms in the IPO market, too," analyst Oh Gwang-young from Shinyoung Securities projected.

Major deals set to happen soon include Doosan Robotics, Seoul Guarantee Insurance Company and EcoPro Materials. The companies have all submitted preliminary approval for listing eligibility review to the Korea Exchange, the nation’s sole bourse operator. If all goes as planned, they are likely to make the listing within this year.

Fadu

One of the major deals coming along is Fadu, a solid-state drive and controller manufacturer. The upcoming listing is garnering attention as it is the first unicorn for a fabless company here, meaning it only designs chips and outsources the fabrication to specialized foundries.

The startup will issue 6.25 million new shares for the listing. Its target price band for the IPO is set at between 26,000 won ($20.34) and 31,000 won, meaning the total IPO proceeds could amount to nearly 1.5 trillion won. It is set to make the listing on Kosdaq on Aug. 7.

Doosan Robotics

Another talk of the town is Doosan Robotics, a co-robot producer under Doosan Group, an energy-to-construction equipment conglomerate here. It is the first time in seven years for a subsidy under Doosan Group to go public. Doosan holds 90.9 percent of the shares of the company.

Market watchers are expecting the company to be valued at more than one trillion won, considering the company's long-term dominance in the collaborative robot industry. The demand for collaborative robots is projected to increase in future due to a shortage of workers in future, and corporations will need to cut costs.

Having submitted its preliminary evaluation application to the Korea Exchange last month, the official IPO process is likely to begin in early August.

EcoPro Materials

EcoPro Materials plans to go public within this year. It is a producer of battery material, supplying the material to secondary battery makers.

If it makes the listing, it will be the first affiliate under the battery material company EcoPro to make debut on Kospi, Korea’s first bourse. The firm’s holdings company and other subsidies EcoPro BM and EcoPro HN are all listed on Kosdaq.

EcoPro is the largest shareholder of EcoPro Materials, with 52.7 percent holdings, followed by the group’s former chairman Lee Dong-chae at 18.84 percent.

With the shares of firms under the EcoPro group soaring backed by retail investor frenzy, EcoPro Materials is expected to receive a valuation of 3 trillion won or more.

The Korea Exchange has been reviewing EcoPro Materials' listing eligibility review for more than three months since it was submitted in late April, as Lee was given a prison term for violating the Capital Market Act in May.

Seoul Guarantee Insurance

Seoul Guarantee Insurance, which offers guarantee insurance service, is getting ready to make a market debut on Kospi. If listed this year, it will be the first time in 13 years for a public company to make a market debut since the Korean District Heating Corp in 2010.

The company’s corporate value is estimated to be rated between 2 to 3 trillion won. The state-run Korea Deposit Insurance Corporation holds a 93.85 percent stake in SGI. The KDIC plans to sell some 10 percent of its holdings through the IPO and sell off the rest of its shares through bloc deals.