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

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Clepsydra Capital

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

Equity Capital Markets

HD Hyundai Heavy Industries  / Equity Capital Markets

SubscriptionHyundai Heavy Industries fixed the offering price at ₩60,000, the upper end of the indicative price band. As a result, it raises ₩1.08T through this IPO, with a market cap of ₩5.33T. HHI's bookbuilding result far exceeded expectations. I expected it to be successful to some extent, but I didn't know it would elicit such a warm response. With this level of success, we may even aim for KOSPI 200 Fast Entry after listing.As the competition rate for institutional subscriptions recorded 1,471 to 1, it was again close to a historical record. HHI also raised more than ₩56T in the margin in retail subscriptions. This is the largest margin since Kakao Bank's listing.









By investor type
Institution
%
Demand
%


1. Local publicly raised funds
587
35.95%
6,851,608,000
37.70%


2. Local brokerages/investment advisories
40
2.45%
462,405,000
2.54%


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
276
16.90%
3,149,173,000
17.33%


4. Local - Other (discretionary investment companies, mostly local hedge funds)
382
23.39%
4,873,338,000
26.81%


5. Foreign (foreign IPO funds &amp; hedge funds)
132
8.08%
705,850,862
3.88%


6. Foreign - Other (mostly local hot money)
216
13.23%
2,132,703,000
11.73%


Total
1,633
100.00%
18,175,077,862
100.00%


Subscription rate
1,835.87

Source: DART

On average, about half went to the pricing above the upper end (including Unspecified). More importantly, all institutions have virtually written prices above 75% of the upper end. In particular, foreign institutions have made a quite aggressive pricing.








Institution type
Above the upper end + Unspecified
% of total demands
Holding tendencies


1. Local publicly raised funds
52.30%
19.80%
Long-term


2. Local brokerages/investment advisories
30.00%
0.71%
Short-term


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
43.84%
7.71%
Long-term


4. Local - Other (discretionary investment companies, mostly local hedge funds)
38.22%

10.29%
Short-term


5. Foreign (foreign IPO funds &amp; hedge funds)
96.97%
3.81%
Long or short-term, depends


6. Foreign - Other (mostly local hot money)
50.93%
6.24%
Short-term

Source: DART

AllocationSome forfeited shares occurred in the ESOP, which went entirely to retail investors. Institutional allocation stood at 55%. Most of the institutional allocation results were taken by institutions with a long-term holding tendency.









Allocation by type
Initial allocation
% of the total offering
% of post-IPO SO


Institutional
55.00%
55.00%
11.15%


1. Local publicly raised funds
-
19.36%
3.93%


2. Local Br/IA
-
0.58%
0.12%


3. Local pension, etc.
-
13.78%
2.79%


4. Local - Other
-
1.89%
0.38%


5. Foreign
-
19.40%
3.93%


6. Foreign - Other
-
0.00%
0.00%


Retail
25.00%
25.60%
5.19%


ESOP
20.00%
19.40%
3.93%


Total
100.00%
100.00%
20.28%

Source: DART


In particular, a pretty decent institutional composition was created by giving about 35% of the institutional allocation to foreigners. This 35% is not a level that we can see as a significantly higher allocation ratio for foreign investors than in past cases. Nevertheless, this foreign ownership ratio is high enough to stabilize short-term investor sentiment. At the same time, almost no allocation was made to local hot money, which is highly likely to engage in short-term trading.









By investor type
Holding tendencies
Applications
Allocated, % of the offering


Local publicly raised funds
Long-term
37.70%
35.20%


Local brokerages/investment advisories
Short-term
2.54%
1.05%


Local pensions, funds managing proprietary assets, banks, and insurance companies
Long-term (pensions) &amp; short-term (proprietary asset managers)
17.33%
25.05%


Local - Other (mostly discretionary investment companies - local hedge funds))
Mainly, short-term
26.81%
3.43%


Foreign (foreign IPO funds &amp; hedge funds)
Depends
3.88%
35.27%


Foreign - Other (mostly local hot money)
Short-term
11.73%
0.00%

Source: DART




HD Korea Shipbuilding & Offshore Engineering (009540 KS)

HD Korea Shipbuilding & Offshore Engineering

Hyundai Heavy Industries Listing: Allocation, Lockups, & Float Schedule