LG Energy Solution Ltd (LGES) on Thursday saw its stock price soar 68% on its trading debut following a record IPO, catapulting the electric vehicle (EV) battery maker to the rank of South Korea’s second-most valuable company.
The convincing debut sets the stage for what analysts expect to be another bumper year for Korean initial public offerings (IPO), with a lack of mega-deals elsewhere in Asia seeing more institutional investors turn their attention toward the country.
But it was the worldwide trend toward the electrification of transport that spurred almost 2,000 prospective foreign and domestic institutional investors to lodge bids worth an eye-watering $12.8 trillion in LGES’ IPO, hoping to bag shares in a company boasting a fifth of the EV battery market and with a client roster featuring heavyweights such as General Motors Co, Volkswagen AG and Tesla Inc.
LGES stock began trade at 597,000 won, almost double the 300,000 won price set in South Korea’s biggest-ever IPO.
It closed at 505,000 won, 68% above the IPO price but 15% lower than Thursday’s open in a market which fell 3.5%. Still, that left LGES, split off from LG Chem Ltd , second only to Samsung Electronics Co Ltd in terms of market value at 118 trillion won ($98.08 billion).
The debut performance was the benchmark KOSPI’s best since financial services firm Kakao Pay Corp gained 114% in November versus its IPO price, and adds to Seoul’s string of blockbuster listings in the past year.
LGES’ market value is still dwarfed by the $208 billion of Chinese rival Contemporary Amperex Technology Co Ltd (CATL). Moreover, analysts have flagged growing competition from Chinese peers expanding globally as well as the prospect of automakers developing their own battery technology.
However, Chief Executive Kwon Young-soo has said a 260 trillion won order backlog highlights LGES’ growth potential.
“The stock is trading at an expected level considering its discount to CATL. Bigger upside will be seen in the second half of this year and next year as its U.S. factories get closer to being fully operational,” said analyst Kang Dong-jin at Hyundai Motor Securities.
Over 20 companies went public on South Korea’s main stock board last year, raising about 17 trillion won, nearly double the previous record of 8.8 trillion won in 2010, showed data from bourse operator Korea Exchange.
Analysts expect even more companies to list in South Korea this year, including startups such as mobility platform company SOCAR and online grocery services firm Kurly Inc.
Encouraging listing hopefuls is the flood of liquidity brought by retail investors, so-called ants, taking advantage of the government’s pandemic-busting economic stimulus policy.
Over 4.4 million retail investors bid a record $95 billion to subscribe to LGES shares, in what was Asia’s largest equity fund raising since China’s Alibaba Group Holding Ltd raised $12.9 billion in its 2019 Hong Kong secondary listing.
($1 = 1,203.1100 won)
(By Heekyong Yang, Jihoon Lee and Joyce Lee; Editing by Miyoung Kim and Christopher Cushing)