KakaoBank prices at top of range despite concerns

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KakaoBank prices at top of range despite concerns

KakaoBank CEO Yun Ho-young talks during an online press briefing held Tuesday, ahead of its planned listing on the Korea Exchange next month. [KAKAOBANK]

KakaoBank CEO Yun Ho-young talks during an online press briefing held Tuesday, ahead of its planned listing on the Korea Exchange next month. [KAKAOBANK]

KakaoBank’s initial public offering (IPO) price was set at 39,000 won ($33.92) per share, the upper end of the range despite a heated debate over valuation.
 
The bank is selling 65.45 million shares, and the pricing target was between 33,000 won and 39,000 won.  
 
As the upper end has been hit, the first internet-only bank to list on the Korea Exchange will be able to raise 2.55 trillion won through the IPO and list with a market capitalization of around 18.5 trillion won, immediately becoming the third largest listed financial institution in Korea after KB Financial Group and Shinhan Financial Group on listing.  
 
KB Financial Group has a market capitalization of around 21 trillion won and Shinhan Financial Group 19 trillion won.  
 
At 39,000 won per share, the company’s price-earnings ratio will be about 169, based on 2020 earnings. The Kospi trades at about an 18.
 
According to the bank’s press release Thursday, 1,667 institutional investors bid for shares during the two-day bookbuilding period that began July 20. Among 65.45 million shares newly issued for the IPO, 55 percent have been allotted for sale to institutional investors.  
 
Among the institutions, 1,287 were domestic institutions and 380 were overseas institutional investors.
  

 
KakaoBank's office in Pangyo, Gyeonggi [KAKAOBANK]

KakaoBank's office in Pangyo, Gyeonggi [KAKAOBANK]

 
The bank attracted some 2,585-trillion-won worth of bids from institutional investors during the bookbuilding process, the largest amount ever, beating the previous record of 2,417-trillion-won set by SK IE Technology, the internet-only bank said. The bank’s shares were oversubscribed by 1,733 times. 
 
KakaoBank said all participating institutions bid higher than the ceiling price of 39,000 won.
 
The bank drew fire in recent weeks as it argued that it should be priced with reference to international fintechs rather than traditional banks in Korea.  
 
Analyst Jeong Tae-joon from Yuanta Securities wrote in a report earlier this month that “the company’s IPO price band, which implies a price-to-book ratio 7 to 12 times higher than large Korean banks, seems unreasonable.”  
 
“As a mobile-only bank, we were very different in nature from the beginning compared with other existing banks,” bank CEO Yun Ho-young said Tuesday.
 
Public subscriptions for the bank’s shares will be held for two days from July 26. Some 16.36 million shares, or 25 percent of its total offering, will be made available. Orders can be made with KB Securities, Korea Investment & Securities, Hana Financial Investment and Hyundai Motor Securities. The company will then list as a Kospi company on the Korea Exchange on Aug. 6.
 
 

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]
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