Korean IPO market may gain momentum this year on improved investor sentiment

[Photo by MK DB]

A slew of small- and mid-size companies in South Korea are gearing up to join the country’s Kospi market this year, raising hopes that the country’s initial public offering (IPO) market that remained sluggish after a series of cancellations may rebound.

According to multiple sources from the financial investment industry on Monday, several companies, including Seoul Guarantee Insurance Co. and EcoPro Materials Co. are tuning the details with the Korea Exchange with an aim to apply for a preliminary review in April.

Smilegate RPG, a video game developer, and Dong In Entech Co., a producer of high-quality technical products, are also working to submit applications for a preliminary review by June. Doosan Robotics Inc., a robot development unit of Doosan Group, is also likely to seek a listing by this year.

Among the companies, Seoul Guarantee Insurance is expected to adopt the fast-track system that shortens the period of IPO procedure while Doosan Robotics is likely to take advantage of a scheme that favors unicorn startups.

Companies are entitled to the fast-track system if their equity capital on an individual basis amounts to 400 billion won ($305.8 million), sales 700 billion won, and 30 billion won in profit. The system reduces the review period to 20 business days from the usual 45 days.

Korea Exchange also allows unicorn startups to be listed on the Kospi market if they meet the requirements of more than 1 trillion won in market capitalization or more than 500 billion won in market capitalization and more than 150 billion won in equity capital.

Doosan Robotics is a loss-making company but it is eligible for the listing as it meets the 500 billion won market cap and 150 billion won equity capital requirement.

Seoul Guarantee Insurance, in the meantime, may postpone the IPO if it is valued less than 3~4 trillion won as it will not be able to recoup the public funds.

The IPO market lost stream last year amid the bearish market. Companies like Hyundai Engineering Co. and SK shieldus Co. called off the IPOs after weak demand.

SSG.com Corp., and CJ Olive Young Corp. also withdrew their listing procedures. Only four companies made debuts last year – LG Energy Solution Ltd., Soosan Industries Co., SoCar Inc., and LX Semicon Co.

Kurly Inc. and all-based lender Kbank also gave up their listings this year.

Investment sentiment among small and mid-size companies, however, is on the path for recovery.

According to Korea Investment & Securities Co., the average competition rate for public subscriptions was 765 to 1 at the end of February, up from 556 to 1 in 2022. The opening price of Mirai Semiconductors Co., Obzen Inc., and Studio Mir Co. doubled their respective offering price and hit the upper limit price.