South Korea’s IPO pipeline dries up amid global growth concerns

Initial public offerings in South Korea have slowed to a trickle after a record year in 2021, as investor sentiment cools on worries about high inflation, slowing global growth and war in Ukraine.

At least 10 Korean companies have canceled their listings this year, including app market One Store, Hyundai Engineering and cybersecurity firm SK Shieldus.

Companies cited difficulties in getting the valuations they wanted as the main reason for the pullbacks, as market sentiment deteriorated and the benchmark Kospi index fell 12% this year.

The last big Korean IPO was LG Energy Solution, the world’s second-largest electric vehicle battery maker, which raised $10.6 billion in January.

One Store delisted this month after failing to attract enough demand from institutional investors, with its competitiveness against global rivals such as Apple’s App Store and Google Play Store in question.

“Many institutional investors viewed our fundamentals positively as our growth potential, profitability and stability, but investor sentiment has weakened significantly in recent months due to growing macroeconomic uncertainty,” the company said.

SK Shieldus had aimed to rise to Won1tn but also canceled its IPO plan this month due to low interest from institutional investors. In late January, Hyundai Engineering, a construction unit of Hyundai Motor Group, dropped its $1 billion listing after failing to secure the lofty valuation it wanted.

“Investor response has not been satisfactory due to poor market conditions,” said an investor relations manager at Hyundai Engineering. “We don’t know when to relaunch the IPO.”

The IPO freeze stands in stark contrast to last year, when 89 companies raised a total of 19.7 billion won ($15.7 billion) in new listings, according to the Financial Supervisory Service. Seventeen of them more than doubled in their trading debut, with the Kospi reaching all-time highs, driven by strong demand from retail investors.

But the series of deals prompted regulators to step up scrutiny of lofty valuations amid concerns about market bubbles.

Monetary tightening is also weighing on equity markets, with growing economic uncertainty weighing on sentiment.

Companies that went public this year have underperformed, with 11 out of 36 Korean companies listing this year below their IPO prices.

“Global investors increased their exposure to Korea last year, but are now pulling back from emerging markets as they prefer safe-haven assets,” one investment banker said.

“Companies will have to rethink their IPO timing because pricing is what matters to them,” said Hwang Se-woon, an analyst at the Korea Capital Market Institute. “This bearish mood is likely to continue into next year as market liquidity wanes and valuations continue to fall.”

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