Large Securities Firms Join Hands with Global Asset Management Giants

Global asset management giants are scrambling to jump into the domestic initial public offering (IPO) market. Local large securities companies, which have joined hands with global giants, earned a fee-related income from institutional investors in the IPO market. However, individual investors turned away as the price of stocks for public subscription decreased after listing. Big securities firms expect that the IPO market, which gathered eight trillion won (US$7.2 billion) in July alone, will revolve also around the institutional investors in the second half of this year. 

According to investment banking (IB) industry sources on August 7, Mirae Asset Daewoo Securities and USB assigned 55 percent of the allotted institutional subscriptions for Celltrion Healthcare listed on the KOSDAQ on July 28 to large foreign institutional investors such as OppenheimerFunds, Wellington Management, Government of Singapore Investment Corporation (GIC) and Goldman Sachs. The five foreign institutional investors bet 2 trillion won (US$1.77 billion) for subscriptions for the shares, which was two times higher than the total amount to be raised, even from demand forecasting. Most of foreign institutional investors who bought Celltrion Healthcare’s stocks in a public offering are super long only funds which own growth stocks for at least two to three years. They don’t make a commitment to own stocks for 15 days to six months but the industry categorize them as long-term investment funds. An official from Mirae Asset Daewoo said, “As the only domestic securities firm that set up syndication headquarters of the equity capital market (ECM) in Hong Kong, our managers with over 10 years of experience overseas are proactively carrying out marketing activities and attracting foreign investment funds.” Mirae Asset Daewoo will seek to attract foreign institutional investors for Jin Air, which is considered a big shot in the IPO market in the second half of the year, to list the company on the KOSPI, and demand for the preliminary examination in September.

NH Investment & Securities, which had the highest IPO commission fees by monopolizing nine out of 21 listed firms in the first half of the year, settled the subscription fees of institutional investors. The company managed the IPO of Netmarble Games, the biggest fish in the first half, in April and turned over 6.2 billion won (US$5.49 million) for underwriting fees alone. It also earned a total of 15 billion won (US$13.27 million), including 6.8 billion won (US$6.02 million) of brokerage fees, which haven’t been received from domestic institutional investors including the management companies of the fund commissioned by the National Pension Service, and performance fees. Netmarble Games received a good score in terms of long-term investment with 47 percent of the mandatory possession rates in the process of subscription by institutional investors. It means that NH Investment & Securities can pick out what’s good and bad due to an increasing number of institutional investors. The company will list TissueGene, whose value is estimated at more than 2 trillion won (US$1.77 billion), in the second half of the year.

Some say that they are faded results. The stock price of Celltrion Healthcare rose nearly 20 percent after the listing. However, the company failed to get long-term investors as foreign institutional investors sold its 1.5 million shares for three days after the listing. Netmarble Games saw the sales of its flagship game, which put up a good show right before the listing, decrease after the listing and its stock prices drop rapidly due to the controversy over exploitation of labor.