South Korean drug company SK Bioscience’s planned initial public offering (IPO) is likely to be the first multi-trillion-won listing deal that allocates shares only to domestic institutions, as it capitalizes on ample liquidity in the local capital market.

SK Bioscience plans to submit a registration statement to the Financial Services Commission on Friday or Saturday, industry sources said. The company is expected to raise a little over 1 trillion won in a deal led by South Korea’s top three underwriters, NH Investment & Securities, Korea Investment Securities and Mirae Asset Daewoo.

The IPO is already attracting strong interest from market insiders as it will be the largest deal in the first quarter and the first worth over 1 trillion won in 2021. It is also the first big-ticket deal which gives an allotment only to domestic institutions. Institutional investors can sign up through accounts at the top three securities firms.

Foreign investment banks and foreign institutions have participated in big-ticket IPO deals since Samsung Life Insurance raised nearly 4.9 trillion won in 2010 through the largest deal in South Korean IPO history. Goldman Sachs was a lead underwriter for the IPO, while Morgan Stanley and Merrill Lynch acted as joint underwriters.

Samsung Life Insurance relied more on foreign institutions. The insurer allocated 60% of all IPO shares to institutions, with foreign investment banks responsible for 40% of the amount and domestic lenders taking up the remaining 20%.

Foreign investment banks participated in the eight largest multi-trillion won IPO deals in South Korea. JP Morgan jointly led Netmarble’s 2.6 trillion won IPO and Citigroup Global Market Securities jointly led Samsung BioLogics’ 2.2 trillion won IPO, which are the second and third-largest listings ever. Foreign investment banks took part in IPOs of Hanwha Life Insurance, Samsung C&T, Samsung SDS, Orange Life and Celltrion.

Big Hit Entertainment’s 962 billion won IPO in 2020 was led by JP Morgan, and SK Biopharm’s 960 billion IPO was led by Citigroup Global Market Securities.

Foreign institutional investors can still participate in the SK Bioscience IPO despite some disadvantages in accessing information and allotments.

Offering circulars written in English are normally provided when foreign investment banks participate in a particular IPO deal. It is the same as the Korean prospectus, which is a legally binding document that gives very accurate information. However, SK Bioscience will not provide an English offering circular, opting instead to issue an IR document which is not legally binding and acts only as a reference tool.

SK Bioscience has chosen to take this strategy to take advantage of increasing liquidity in the domestic market and an improving investment banking capability. The country’s benchmark Kospi hit a historic 3000 points earlier this month, continuing an upward trend that began last year despite the Covid-19 pandemic. 

SK Biopharm carried out its book building process in June 2020 and orders for shares were oversubscribed by more than 835 times, with domestic institutions accounting for 97.5%. Orders made by domestic institutions amounted to 468 trillion won, given that the offering price was fixed at 49,000 won per share. The deal was led by NH Investment & Securities.

The trend is continuing this year, with Samsung Securities and KB Securities leading the listing of Prestige Biopharma, which was worth 491 billion won. About 100 million shares were subscribed toward institutional investors during the book building process, while domestic institutions took up 92% of the total.

“The IPO of SK Bioscience is symbolic as it is the first multi-trillion-won deal which raises funds primarily from domestic institutions,” said an industry source, adding, “If it is successful, the domestic capital market and investment banking capability will have an opportunity to be re-evaluated.” (Reporting by Kyung-ju Lee)

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