FINANCE

Stock plunges on unfavorable investor sentiment

Despite an unprecedented investment frenzy ahead of the initial public offering of SK IE Technology (SKIET), the stock ended at 154,500 won ($137), Tuesday, the first day of the much-anticipated IPO, down 26.43 percent from 210,000 won at the opening bell

Despite an unprecedented investment frenzy ahead of the initial public offering of SK IE Technology (SKIET), its share price ended at 154,500 won ($137), Tuesday, the first day of the much-anticipated IPO, down 26.43 percent from 210,000 won at the opening bell. It was also the first instance among major IPOs here during the past year that a newly-traded stock failed to reach the daily 30 percent increase limit on the first day of trading.

The stock price of the battery materials arm of SK Group started trading on Tuesday at 210,000 won, twice the subscription price of 105,000 won, and quickly peaked at 222,500 won, up 5.9 percent, at around 9:04 a.m.

But the share price plunged afterward, falling more than 20 percent just 30 minutes after trading began. SKIET shares fell even further to 155,500 won at 12:30 p.m., followed by slight fluctuations throughout afternoon trading. The stock price fell as low as 154,000 won at 3:20 p.m. and closed at 154,500 won.

With the closing price, the market cap of the battery materials maker specializing in lithium-ion battery separators is estimated at around 11.2 trillion won.

During the subscription process late last month, SKIET drew a whopping 80.9 trillion won from retail investors, an all-time high for any listed firm on the Korean stock markets.

This figure far exceeded the record of SK Bioscience, which attracted 63.6 trillion won from retail investors during the general subscription period in March. SKIET also led an all-time high book-building competition rate of 1,883:1 among institutional investors during the IPO process.

Experts cited three reasons for SKIET’s disappointing debut on the stock market.

“First, SKIET’s subscription price didn’t seem to provide merits to investors. Second, the current global market conditions surrounding the electric vehicle (EV) market wasn’t favorable for investor sentiment, given that Tesla, a representative stock of the sector, as well as other EV stocks, are still undergoing price corrections,” Hwang Kyu-won, analyst at Yuanta Securities Korea, told The Korea Times. He added that a string of recent media reports about a lack of confidence some major global automakers have over Korean-made EV batteries could also affect investor sentiment. In a conservative forecast, market analysts project SKIET’s stock price to face further

downward pressure until it reaches the expected short-term trough in the 100,000 won range, which is somewhere around the subscription price of 105,000 won, in the next few months.

“Given that the first batch of a massive number of shares were sold on Tuesday by retail investors, the stock’s short-term trough will be

formed after another large batch of stocks are thrown into the market by institutional investors when their lock-up periods end,” analyst Hwang explained.

Yet analysts say a long-term investment with the firm would also be a decent option, considering the company’s solid investment plans with the capital raised through the

IPO, as well as the global battery separator market being expected to grow 3.9 times over the next five years.

“SKIET’s revenue in 2021 is expected to stand at 799.9 billion won, which is a 70 percent year-on-year increase, while its annual operating profit for this year is expected to come in at around 220 billion won,

a 75 percent year-on-year hike,” Joo Min-woo, analyst at Meritz Securities, said.

The analyst also forecast SKIET’s 2022 revenue at 1.16 trillion won and operating profit at 360 billion won, a 64 percent year-on-year increase, given the company’s increased production capacity by opening new factories in China.