Listed Korean Inc. financing through stock issue more than halves Oct from a year ago

Korean Inc. financing through the local stock market halved from a year ago in October due to liquidity scare triggered by a default of a public debt related to Legoland Korea project.

According to data compiled by FnGuide on Sunday, stock increases through new share sale valued at 411.9 billion won ($290 million) Oct. 1-25, more than halved from 945.4 billion won worth.

From January to October, there were 379 secondary stock offerings valued at 24.71 trillion won, down 11.4 percent by number and 14.7 percent by value from a year ago.

The plunge in stock issues can raise that much of corporate credit risk because companies generally rely on share issuance to raise long-term funds, said Hwang Se-woon, a researcher at Korea capital Market Institute.

Of the 29 firms that added equity capital this month, 19 or 65.5 percent were privately placed due to doubtful public demand. Seven companies offered new shares this month to obtain working capitals, including Lotte Engineering & Construction that sought to raise 200 billion won, suggesting even big companies are struggling with capital shortages.

Secondary offering during a bear market is hard to succeed, according to Kim Dong-young, an analyst at Samsung Securities. Daily trade turnover on the Kospi this month plunged 38 percent on year to 7.4 trillion won this month, and outstanding balance in stock trading accounts plunged to below 50 trillion won for the first time in two years and three months.

Small- and mid-sized listed firms are under greater stress as no brokerages are willing to underwrite their offerings to avoid the situation in which they have to purchase the forfeited shares.

Startups are equally hard-up.

Korean startups and SMEs attracted 1.25 trillion won in fresh funding in the third quarter, down 40.1 percent on year. The number of companies who raised 10 billion won or more nearly halved to 22 from 43 a year ago.

IPO candidates have pushed back the plan or scaled down the IPO price and other terms.

Out of 16 firms who proceeded with the book-building for IPOs in the third quarter, nearly half priced their initial shares at the bottom of the desired band or below.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]