Korean brokerages taking more risks with startups via pre-IPO investments

2022.05.06 10:45:24 | 2022.05.06 10:59:44

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Investment banking operations under South Korean brokerage houses are taking more risks through direct investment in startups for long-term and higher growth.

The IB division of Korea Investment & Securities achieved 50 percent in internal rate of return (IRR), an estimate for potential investments from its investments, from its investment in local visual content solution provider Giantstep and industrial robot manufacturer Yuil Robotics.

Both companies successfully debuted on the market, hitting the daily highs after doubling their offering prices on the first trading day.

The securities firm has increased its direct investment in young companies with promising technologies in the metaverse, artificial intelligence, and lithium-ion battery fields since 2014. Its investment in those companies increased from 70 billion won ($55.27 million) in 2020 to 86 billion won in 2021.

NH Investment & Securities invests directly in companies by joining pre-IPO funding round if its IB division confirms growth potential during due diligence. It invested 36 billion won in bio firm GI Innovation in a pre-IPO places, and 2~3 billion won each in FromBio and Lumir through PI placements.

Hana Financial Investment has also been active in startup investment through pre-IPO placement. It invested 50 billion won in system semiconductor maker Nepes Ark in 2019 before the latter’s IPO and collected handsome profit after the company’s successful IPO.

Daishin Securities has invested 542 billion won in Innox Advanced Materials and L&F through new technology financing since 2018. Its annual direct investment in startups jumped from 50 billion won in 2018 to 371.9 billion won in 2021. Shinhan Investment Corp. has invested in overseas startups through its global investment banking unit, including mobile ad platform Moloco in Silicon Valley and Indonesian e-commerce firm Bukalapak.

Local securities firms have been upping their direct investment in digital startups to benefit from their IPOs after successful debuts of Coupang, Roblox and Hybe.

By Park Chang-young, Kang Doo-soon, Cho Yoon-hee, and jenny Lee

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