Korean IPO pipeline hit bottleneck as big and small candidates pull out

2022.05.12 10:14:02 | 2022.05.12 10:14:49

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South Korean initial public offering (IPO) has come to a bottleneck, with aspiring expectants calling off their debuts in the face of wary investment sentiment from a myriad of adverse market conditions.

One Store Co. became the second disappointment under SK square as it withdrew IPO despite its promise to see through the listing regardless of the setback of SK shieldus whose IPO floundered last week from poor pricing results.

SK square Co., the parent of mobile app store operator on Wednesday held an emergency meeting, to cancel One Store’s IPO after pricing fell short of expectations.

Global Sae-A, the largest shareholder of Sae-A Trading that owns corrugated cardboard maker Tailim Paper on the same day called off Tailim Paper’s IPO due to low institutional participation.

One Store’s decision had not been easy as a second withdrawal could deal as a severe blow to SK square since its separation from SK telecom as standalone investment arm.

Until Wednesday morning, the company had hoped to proceed with the IPO by scaling back the offering and pricing.

But SK square and underwriters decided to pull out the IPO altogether.

Despite its rosy outline of expanding to Asian market, institutions questioned its competitiveness beyond the home turf against Google Play.

Its two-day bookbuilding session ended with a 100:1 competition ratio on Tuesday and most institutional bids fell below the desired pricing band.

Upon a series of IPO setbacks, SK square has recruited Bae Hak-jin, a former vice president with expertise in investment banking from the National Pension Service.

Bae – who worked for NPS for about 10 years from 2011 – is an alternative investment expert that led private equity fund and corporate investment at National Pension Fund Management. He focused on private equity in U.S. in Korea based on its career experience working in NPS’s New York branch.

Bae would be responsible for joint investment and fund creation with asset managers at home and abroad.

In March, SK square had also recruited former trade ministry official Kim Jeong-il as vice president to enhance overseas capacity.

SK square plans to secure more than 2 trillion won ($1.56 billion) in self investment funds over the next three years and carry out merger and acquisitions and investment in chip sector with goal to become a global ICT investment company. It is also open to joint investments with investors at home and abroad.

Its plans to raise proceeds through IPOs to finance M&As have stumbled. Apart from SK shieldus and One Store whose IPOs have been put off, 11Street, Contents Wavve, and TMAP Mobility are candidates to go public by 2025.

Shares of SK square are at fresh record low of 43,900 won early Thursday, losing 1.8 percent from the previous closing.

Tailim Paper meanwhile, will decide whether to reattempt IPO after reviewing future market conditions.

Global Sae-A Group had acquired Tailim Packaging and Tailim Paper via Sae-A Trading in 2020. Tailim Paper – founded in 1986 – manufactures and produces corrugated fiberboard and boxes. It also has Korea’s No. packaging firm Tailim Packaging under its arm.

Tailim Paper’s sales are from 14.3 percent surface paper, 13 percent fluted paper, 14.7 percent reusable paper, and 24.4 percent corrugated cardboard fabric.

Investment banks found Tailim Paper’s pricing terms overly high.

Tailim Paper proposed 11.1 times its price earnings ratio (PER) as target price, which is higher than the five to six times average PER of corrugated fiberboard. The offering also included too many existing shares.

By Kang Woo-seok, Cho Yoon-hee, and Lee Eun-joo

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