IPO Boom Fades... Now It's Time to Be Selective [Click-e-Market]

Six Companies Went Public in August, Raising 21.06 Billion Won
Weakness in Competition, Lock-up Commitments, and Returns
More IPOs Scheduled for September... Selective Investing Needed

The sentiment in the IPO market is changing. In the first half of this year, the number of newly listed stocks was limited, and abundant market liquidity led to an inflow of funds even into small- and mid-cap IPOs. Subscription competition rates were high, and many investors expected sharp gains immediately after listing. However, since August, this fervor has faded quickly. Analysts now say that investors will need to be more selective with IPOs in the second half of the year.

On September 2, Samsung Securities predicted that processes for screening investment opportunities would begin to appear among IPOs as the market has cooled. Excluding SPACs, a total of six companies debuted on the IPO market this month, raising 21.06 billion won. These included the B2B wholesale fashion platform Delicious, military and maritime satellite antenna manufacturer KNS, vascular disease antibody drug developer Ingenia Therapeutics, functional apparel OEM Kidosanup, autonomous flight drone company Nearthlab, and semiconductor sensor fabless company HATCHTECH.

The challenge lies in investor sentiment. As of the end of July, this year's average IPO subscription competition rate among institutional investors was 962 to 1, and for individual investors, 1,769 to 1. In contrast, the competition rates for IPOs listed in August fell far short of these numbers. For Delicious, it was 10.3 to 1 for retail subscriptions; Ingenia Therapeutics recorded 3.1 to 1, while Kidosanup posted 5.5 to 1.

Institutions have also become more cautious. The rates of lock-up commitments and allocations have declined. For Kidosanup, the lock-up commitment application rate was 0%, and for Delicious, it was just 0.1%. Rather than confidently committing their shares immediately after listing, institutions preferred to secure short-term liquidity.

Post-listing returns have also dampened enthusiasm for IPOs. With the exception of Ingenia Therapeutics, most companies that went public last month were trading below their IPO prices as of the end of August. The returns were: Delicious -53.9%, Kidosanup -48.1%, and HATCHTECH -34.4%, respectively. The repeated pattern of shares surging on listing day only to fall below their IPO prices has undermined the belief that "all subscriptions yield profits."

Accordingly, the need to be selective is growing in the September IPO market. Excluding SPACs, a total of eight firms, including Neosapience, BRILLS, and Wise Planet Company, are scheduled to go public this month—a supply increase from one company in the same month last year and six companies in the preceding month. Sectors drawing keen interest from individual investors, such as robotics and artificial intelligence (AI), are also included.

There are also positive expectations toward the end of the year. November and December are traditionally the high season for IPOs. Several KOSPI listing candidates, a group absent since Kbank, have placed their names on the preliminary review list. Listings of unicorns (privately held companies valued at more than 1 trillion won), such as Musinsa, Megazone Cloud, and Rebellions, are also becoming more visible. Expectations remain high for improvements to IPO-related systems, including preliminary demand forecasts and the cornerstone investor regime.

However, investment strategies have to change. In a market with few IPOs, excessive funds often produced short-term profits. But as the number of listed stocks increases and investor sentiment wanes, differentiation by company becomes more prominent. Now is the time to carefully examine whether IPO prices are reasonable and if there is a heavy supply overhang post-listing. Younghoon Kang, a researcher at Samsung Securities, explained, "Investors should selectively invest, taking into account each company's performance, growth potential, and valuation."

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