There is speculation that South Korean pension funds may take a bigger role in the growing investor rush for initial public offering (IPOs) after largely sitting on the sidelines, as potentially lucrative returns have become hard to resist.
Fueled by ample liquidity, investor deposits for IPO subscriptions have reached 150.9 trillion won ($134 billion) since January, about 1.5 times more than the total for all of 2019.
Drug firm SK Biopharmaceuticals triggered the rush by investors when its IPO attracted nearly 31 trillion won in June. Gaming company Kakao Games, which made its debut on South Korea’s tech-heavy KOSDAQ market early this month, set a new record for IPO subscription deposits by raking in 58.5 trillion won.
Analysts attributed the IPO upsurge to the plentiful supply of market liquidity amid record low interest rates, and renewed investor interest in the stock market because of a lack of other promising investment vehicles. Some retail investors even took out large loans to subscribe to blocks of shares at IPOs.
Pension funds have not been active, but that may be about to change, as they can expect decent returns from an IPO.
The newspaper SE daily reported that major pension funds and mutual aid associations, including National Pension Service, Korean Teachers’ Credit Union and the Military Mutual Aid Association, had shown interest in the impending IPO of Big Hit Entertainment, the management agency for K-pop super group BTS.
Big Hit Entertainment plans to sell 7.13 million shares at a price range of 105,000 won to 135,000 won. Based on this price, estimates of the market value of the company are as high as 4.8 trillion won ($4.13 billion), well above the combined market capitalization of the nation’s three management agencies ― JYP Entertainment, YG Entertainment and SM Entertainment.
Local brokerage houses have offered encouraging estimates, with Hana Financial Investment Co. forecasting the market value could reach 14 trillion won, and suggesting 380,000 won as the target price.
The stock price of Kakao Games has more than tripled compared with the public offering price, although it is now slightly down from its peak. (Reporting by Kyoungho Lee)