Samsung SDS IPO is already oversubscribed

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Samsung SDS IPO is already oversubscribed

With a week left before the official listing of Samsung SDS on the Korean stock market, the IT service affiliate of the nation’s leading conglomerate kicked off the process by accepting retail investors’ subscriptions to 20 percent of the six million initial public offering shares yesterday.

The subscription of 1.2 million shares, which will continue until 4 p.m. today, attracted huge demand. Yesterday, there were 15 offers for every share.

The competition is expected to really heat up later today as major investors are expected to join in. It was predicted earlier that retail investors’ competition would make the shares oversubscribed to the tune of 500 times. During institutional investors’ IPO share subscriptions held for two days since Oct. 29, the competition was estimated at 651 to 1.

The steeper the competition, the fewer the shares sold to each investor.

If the offering is 100 times oversubscribed, an investor who placed an order for 1,000 shares only gets 10.

The IPO is one of the biggest for the local market in four years, and although the company set a price of 190,000 won ($175) per share at the end of last month, Samsung SDS shares have been trading at 350,000 won.

The last major IPO for the market was Samsung Life Insurance in 2010. Samsung SDS is expected to be the nation’s third-largest IPO in history after Samsung Life, which raised 4.8 trillion won, and Korea Life Insurance, which raised 1.8 trillion won in 2010. This IPO is expected to raise 1.1 trillion won.

Retail investors are buying the shares through five brokerage houses including Korea Investment & Securities, which is in charge of Samsung SDS’s IPO. The other brokerage firms are Samsung Securities, Shinhan Investment Corporation, Hana Daetoo Securities and Dongbu Securities.

Korea Investment & Securities was allocated 658,700 shares while Samsung Securities was given 451,300 shares and other brokerage firms 36,500 shares each.

A single individual can purchase a maximum of 30,000 shares at Korea Investment & Securities, while the limit at Samsung Securities is at 22,000 shares. Shinhan’s limit is 3,600 shares and for the other two it is 3,500 shares.

The listing is scheduled for Nov. 14.

Although the official reason for the company’s IPO is to expand its business, including an aggressive entry into the global market, it has been widely understood that it is also a part of the succession process for Samsung heir-apparent Jay Y. Lee. Samsung Electronics is the largest stakeholder of Samsung SDS with 22.6 percent. Lee personally owns 11.25 percent of the company.

Since late last year, Samsung Group has been undergoing a major restructuring including shutting down or merging overlapping businesses and IPO preparations for Cheil Industries, the de facto holding company of Samsung Group.

Cheil Industries’ IPO, which is of major interest to the financial market, is expected on Dec. 18. This IPO is expected to raise between 1.3 trillion won and 1.5 trillion won as it is believed that the proposed price for the shares will be between 45,000 won and 53,000 won.


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