Domestic IPO market gains in number, variety

As 2012 begins, the global initial public offering market is already buzzing with anticipation for one of the hottest offerings in recent memory: the IPO of social media giant Facebook, reportedly planned for early this year.

Here in Korea, this year’s IPO market casts a wider net. Rather than a few blockbuster offerings, some 70 companies in a variety of sizes, positions and business sectors are preparing to go public in what could be the biggest domestic IPO market in history.

However, experts say that continued uncertainties in global financial markets could sink or delay offerings, as initial public offerings tend to follow the rise and fall of stock indexes.

According to brokerages, an estimated value of between 4 to 5 trillion won ($3.47 to 4.34 billion) in public offerings are waiting in the wings this year.

This continues the bumper crop of the last two years, with roughly 4 trillion won gathered by initial public offerings last year and 10 trillion won flocking to IPOs in 2010 - growing from what was at maximum a 2-trillion-won annual market before 2010.

The highest amount of anticipation surrounds the public offering of major oil refiner Hyundai Oilbank.

With Hyundai Heavy Industries currently holding a 90 percent stake, Hyundai Oilbank’s offering is expected to be around 2 trillion won and will be the largest single public offering since that of Samsung Life Insurance in 2010, which raked in 4.89 trillion won at the time. The company is expected to complete filing processes in May at the earliest.

Welterweight IPOs are also in the pipeline, with major conglomerate affiliates like semiconductor device manufacturer LG Siltron, cable TV provider CJ HelloVision, wire and cable maker LS Cable & System as well as insurer Mirae Asset Life Insurance all in various stages of preparation for offerings estimated to be between 200 billion won and 500 billion won respectively.

Companies such as domestic coffee franchise Caffe Bene and artificial fiber manufacturer Kolon Fashion Materials are also planning their public offerings this year.

Brokerages such as HI Investment & Securities have also speculated that unlisted companies of Samsung Group such as Samsung SDS, Samsung Petrochemical or Samsung Everland could come on the public offering market this year as Korea’s leading conglomerate began streamlining the complicated ownership structure of its affiliates last month.

Possessing a wealth of unlisted affiliates, experts also pointed to Lotte Group subsidiaries as possible IPO candidates.

“If the IPOs of Samsung Group or Lotte Group affiliates are added to the mix, the 2012 market could be the largest in record,” said Cho In-jik, head of IPO analysis at KDB Daewoo Securities.

With low interest rates and a lagging real estate market, IPOs have recently gained ground as a viable short-term, high-return investment outlet. The competition to secure stocks in YG Entertainment’s public offering last Nov. had risen to 560-to-one.

However, the stock market remains the unknown variable, as public offerings dry up when stock indexes tank. Many companies worldwide, including Posco Engineering & Construction, planned to go public in 2009 but withdrew the plan as equity markets struggled in the aftermath of the 2008 global financial crisis.

“There are several notable deals coming up in 2012, but the common wisdom is that it will be difficult to sell,” said one brokerage official.

By Lee Jung-yoon [joyce@joongang.co.kr]