The South Korean initial public offering (IPO) market has suffered the worst contraction for two years in a row as the intensifying trade war between the United States and China and Korea's economic downturn weighed down its stock market.
The volume of new IPOs came to 1.17 trillion won (US$990.30 million) in the first half of this year, down 37 percent, or 708.20 billion won (US$597.13 million), from 1.88 trillion won (US$1.59 billion) a year earlier, according to Korea Exchange (KRX) on June 18. The figure shrunk nearly 63 percent compared to the first half of 2017, showing the worst IPO performance for two consecutive years.
The number of companies which undertook an IPO totaled 19, down 13 from 32 a year ago.
In fact, there has been no big IPO in the domestic market since last year. The total amount of IPOs increased from 6.15 trillion won (US$5.18 billion) in 2015 to 10.53 trillion won (US$8.88 billion) in 2016 and 12.18 trillion won (US$10.27 billion) in 2017, but the figure dramatically fell to 3 trillion won (US$2.53 billion) last year.
The IPO market has rapidly shrunken as a series of big IPO plans worth more than 1 trillion won (US$843.17 million) were aborted. Furthermore, the recent “Invossa” debacle has made it difficult for technology companies to be listed on the tech-heavy market under the eased listing rules.
The domestic stock market, which lost more than 20 percent compared to its year-high, is the main factor freezing the IPO market. A considerable number of firms with no financial problems among companies that already requested screening in preparation for going public decided to withdraw their IPO plans because of the sudden drop in stock prices.
Bodyfriend, which was considered the biggest IPO this year, withdrew its listing plan five months after it tried to go public. Homeplus Ritz, which was this year’s first IPO worth over 1 trillion won (US$843.17 million), also withdrew its listing application in March. In addition, it is currently unclear whether other companies which sought to go public, such as E-Land Retail, Hyundai Oilbank and Kyobo Life Insurance, will be listed.
It is now virtually impossible for the government and KRX to achieve their ambitious goal. KRX expects that the volume of new IPOs on the KOSPI market will reach 5 trillion won (US$4.22 billion) this year. The number of companies newly listed on the KOSDAQ market is estimated at 100. Considering the fact that the number of firms which received approval on the preliminary examination for listing on the KOSDAQ market until the end of October was 32, it seems to be impossible to meet the target for two months. Experts believe that it will be hard to surpass the level of last year when 84 companies were listed, considering the recent stock market situation.