S Koreas IPO Market Poised For Record Year On Booming Retail Demand

South Korea is set for the busiest year ever for new share sales as companies ranging from a digital bank, game developer to an electric car battery maker rush to take advantage of robust retail demand, bankers and analysts said.

Its IPO market could raise up to 20 trillion won ($18.40 billion), a record and about four times above 2020 levels, led by firms providing products that are more in demand from people stuck indoors due to the pandemic, analysts said.

Also, a move by the country’s financial regulator to increase the allocation of IPO shares to retail customers this year will drive up investment, they added.

The projection comes against a recent rally in the main KOSPI index to above 3,000 for the first time, with investors looking towards a broad recovery in exports beyond South Korea’s tech titans.

This is “shaping up to look like it could be a record year”, said David Chung, head of Korea investment banking at Goldman Sachs. “The majority of big mandates and IPO themes are around the technology sector.”

That includes companies that were offline but now, amid the health crisis, have built up a significant online presence, Chung added. “That is where the growth is.”

Deals in the pipeline include a potential 4.6 trillion won float from KakaoBank, which has benefited from an inflow of customers from South Korea’s dominant chat app operator Kakao Corp. Kakao has a 32% stake in KakaoBank.

KakaoBank has picked advisers but not decided when it will list, a spokesman said.

An estimated 9-trillion won share sale by Tesla supplier LG Chem’s electric car battery unit is also in the pipeline, according to an analyst.

The IPO size or timing has not been decided yet, an LG Energy Solution official said.

South Korean companies raised about 4.7 trillion won via initial public offerings in 2020, Korea Exchange data shows, surpassing the past two years, but behind an all-time high of about 10 trillion won reached in 2010.

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EV battery maker SK Innovation’s chemical material unit SK IE Technology (SKIET) is also expected to make its market debut this year, bankers and analysts said.

SKIET said it plans to complete the IPO process within 2021.

Consumer demand for EVs has been relatively resilient, aided by tighter environment regulations and the launch of new models.

In South Korea, a “New Deal” economic initiative that pivots on digital innovation and eco-friendly growth is burnishing the appeal of EV-related stocks.

Gaming company Krafton and SK Bioscience are also looking to raise about 5 trillion won and 600 billion won, respectively, this year, Seoul-based SK Securities said.

In October, Krafton picked advisers for its IPO with plans to go public in 2021. A company spokeswoman said on Friday there were no further details to share at the moment.

SK Bioscience was not immediately available for comment.

Individual investors, who piled into the South Korean market last year, are trading at a pace not seen in years.

In 2020, the KOSPI clocked its biggest rise since 2009 as shares in companies like Samsung Electronics, the world’s biggest maker of memory chips, surged.

“The market right now is clearly attractive to retail investors and it will likely attract more of them as IPO shares allocation for retail investors has gone up to as much as 30% from 20%,” said Lee So-joong, an analyst with SK Securities.

Reuters