Korea’s LG CNS, DN Solutions seek billions of dollars via Jan IPOs

LG CNS Co., DN Solutions Co. and other South Korean companies aim to raise billions of dollars through domestic initial public offerings (IPOs) in January next year, betting on the belief in a seasonal increase in stock prices in the first month of each year.

LG CNS, DN Solutions, K Bank, Seoul Guarantee Insurance Co. and Lotte Global Logistics Co. plan to go public in the first quarter, investment banking industry sources said on Friday.

LG CNS, DN Solutions, K Bank and Seoul Guarantee Insurance are targeting IPOs in January on a hypothesis that there is a seasonal anomaly in the financial market where securities' prices increase in the month more than in any other month, according to the sources. Lotte Global Logistics is seeking a listing in March or April, according to the sources.

The corporate values of LG CNS, the information technology service unit of South Korea’s No. 4 conglomerate LG Group, and DN Solutions, the world’s third-largest machine tool maker, were estimated at up to some 7 trillion won ($5 billion) each.

The enterprise value of K Bank, which postponed a listing plan earlier this month, was estimated at as much as 5 trillion won, while Seoul Guarantee was valued at around 3 trillion won. Lotte Global Logistics’ corporate value was estimated at up to 1.5 trillion won.

RECOVERY SIGNS

The plans came as South Korea’s IPO market showed some signs of a recovery as 10 firms excluding special purpose acquisition companies (SPACs) and real estate investment trusts (REITs) are expected to debut on the main Kospi market this year.

The market has slowing down with the number of newly-listed companies on the Kospi down to five in 2023 and four in 2022 from 15 in 2021.

“The IPO market has yet to be further depressed although K Bank postponed its IPO due to weak demand,” said a financial industry source. “More companies are eye on listings sooner as nobody knows if the market condition deteriorate further.”

POTENTIAL VALUATION WOES

Their listings may face valuation concerns as they plan to go public to meet IPO deadlines, which they have pledged to financial investors such as private equity firms. Their enterprise values are likely to be estimated at levels, at which they vowed to investors.

Existing shares held by financial investors make up much of stocks to be offered for their IPOs, which are expected to reduce appetite among new investors, sources said.

Stocks owned by existing shareholders are set to account for 50% of shares to be offered by LG CNS, DN Solutions, K Bank and Lotte Global Logistics, while Seoul Guarantee Insurance plans to sell only stocks held by existing shareholders.

Their IPOs are also expected to absorb money available for the entire domestic IPO market, which may prevent smaller firms from listings, sources added.

Write to Seok-Cheol Choi at dolsoi@hankyung.com
 
Jongwoo Cheon edited this article.