Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

K Car (Korea's Carvana?): Offering Details, Pricing Structure, & Valuation Issues

K Car IPO - Insti Demand Breakdown and Pricing

Gravity Works As WeWork Doesn't; Now Plan B

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

SubscriptionThe offering price got finalized at ₩25,000, even much lower than the lower end of the indicative price band. As a result, it gets to raise ₩337B through this IPO, with an implied market cap of ₩1.22T.





Final pricing

Price
₩25,000


: Total offering
13,464,231


: Primary
1,202,164


: Secondary
12,262,067


Base deal size
₩336.6B


: Institutional allotment
₩231.4B


Implied market cap
₩1,222.5B


: Discount
56.00%

Source: DART

The bookbuilding result fell far short of meeting the initial expectations. The competition rate for institutional subscriptions remained at 40 to 1. So, yes, it was virtually the lowest among this year's +₩1T big IPOs, even compared to Krafton (274 to 1). K Car also performed poorly in the retail subscription, which ended at 8.7 to 1, the third-lowest among this year's IPOs.The subscription participation rate is so low that the proportion of each institutional investor type does not mean much. Nevertheless, let's take a closer look. It appears that the proportion of institutional investors with long-term holding tendencies is relatively large, which is at least a good thing for an IPO that has performed so poorly in the bookbuilding.









By investor type
Number of participating institutions
%
Orders applied
%


1. Local publicly raised funds
186
50.13%
100,058,000
33.78%


2. Local brokerages/investment advisories
9
2.43%
52,000
0.02%


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
56
15.09%
63,108,000
21.31%


4. Local - Other (discretionary investment companies, primarily local hedge funds)
69
18.60%
64,045,000
21.62%


5. Foreign (foreign IPO funds &amp; hedge funds)
51
13.75%
68,929,968
23.27%


6. Foreign - Other (mostly local hot money)
0
0.00%
0
0.00%


Total
371
100.00%
296,192,968
100.00%


Subscription rate
40.00

Source: DART

Looking at the order quantity by price range, more than ₩43,200 (the upper end) is close to half. In other words, few institutions have approached this IPO quite positively and aggressively. So, the outcome of this IPO's institutional subscription wasn't the worst. However, because too few institutional investors participated, and about 70% priced it below ₩34,300 (the lower end), the issuer has decided to go super conservative on the pricing.









By price
Number of participating institutions
%
Orders applied
%


&gt; ₩43,200
63
17.00%
142,541,278
48.10%


₩34,300 ~ ₩43,200
54
14.60%
36,579,369
12.30%


&lt; ₩34,300
245
66.00%
114,946,320
38.80%


Unspecified
9
2.40%
2,126,000
0.70%


Total
371
100.00%
296,192,968
100.00%

Source: DART


Allocation
We had a huge amount of forfeited shares from the ESOP, which all went to the institutions, bringing up the institutional allocation weight close to 75%. The remaining 25% went to local retail. Most institutional allocation went to local institutions, and those with relatively long-term holding tendencies have taken two-thirds of it.
On the other hand, the foreign institutional proportion isn't high, accounting for 10% of the total offering and 14% of the institutional allocation. But for an IPO of this size and this much low participation overall, this 10% of the total offering allocated to foreign institutions should be somewhat surprising (in a positive way).









Allocation by type
Holding tendencies
Final, % of the offering
Final, % of post-IPO SO


Institutional total
-
72.70%
20.37%

 

Local publicly raised funds
Long-term
36.45%
10.21%


Local brokerages/investment advisories
Short-term
1.76%
0.49%


Local pensions, funds managing proprietary assets, banks, and insurance companies 
Long-term (pensions) &amp; short-term (proprietary asset managers)
10.97%
3.07%


Local - Other (mostly discretionary investment companies - local hedge funds)
Mainly, short-term
13.52%
3.79%


Foreign (foreign IPO funds &amp; hedge funds) 
Depends
9.99%
2.80%


Foreign - Other (mostly local hot money)
Short-term
0.00%
0.00%



Retail
-
25.00%
7.00%


ESOP
1-year lockup
2.30%
0.63%


Total
-
100.00%
28.00%

Source: DART




K Car Listing: Final Allocation, Lockup Schedule, & Immediate Float