Financial groups in South Korea are seeking to raise billions of dollars through initial public offerings as part of efforts to cash in on booming share prices and to meet tough new regulations.
As many as six large financial companies are lining up listings on the Seoul bourse, starting in 2021 with the planned debuts of mobile payments group KakaoPay, online lender KakaoBank and the $2bn IPO of Hyundai Card, the South Korean conglomerate’s credit card unit.
Kyobo Life Insurance, the country’s third-largest life insurer with Won107tn ($96bn) in assets, told the Financial Times it is also eager to revive a long-delayed IPO that could raise Won1.5tn-Won2tn in 2022.
Internet lender K Bank and fintech start-up Viva Republica could also push for listings in two to three years, according to investment bankers with direct knowledge of the matter.
South Korea’s IPO market is on track for its biggest year since 2017 as a rally in shares, partly due to the country’s economic recovery from coronavirus, fuels investor enthusiasm for new listings. The blockbuster debut of Big Hit Entertainment, the music label behind K-pop superstars BTS, raised $4.1bn in October.
The benchmark Kospi Composite index has surged nearly 60 per cent from its March low, with the recent listings of SK Biopharmaceuticals, Kakao Games and Big Hit heavily oversubscribed by retail investors looking for higher returns against a backdrop of near-zero interest rates.
“If the stock market continues to rise, more financial firms will pursue IPOs in the next couple of years,” said Hwang Sei-woon, a researcher at Korea Capital Market Institute.
While financial shares have benefited less from the market’s bounce due to a difficult profit outlook, an increasing number of financial groups are looking to tap investors in order to accelerate growth and comply with tougher regulations. “Raising capital has become more urgent for them in order to meet financial regulations,” added Mr Hwang.
South Korean insurers are under pressure to boost their reserves ahead of the introduction of stricter capitalisation and accounting standards in 2023.
The new rules “will sharply increase our liabilities”, Shin Chang-jae, chairman of Kyobo Life Insurance, told the FT, warning that South Korean companies did not have enough time to prepare compared with their European counterparts.
Kyobo’s timeline for the listing is dependent on settling a case with its investors.
Mr Shin, the group’s biggest shareholder with a one-third stake, has entered arbitration with investors including Affinity Equity Partners, Baring Private Equity Asia and GIC Private.
The case relates to the investors’ 2018 decision to exercise a put option that allowed them to sell their 24 per cent stake in Kyobo, worth about $1.8bn at the time, back to Mr Shin. The parties have not been able to agree on a price for the stake, with the Kyobo chairman expecting a legal ruling from the International Court of Arbitration in the second half of 2021.
“We are keen to revive the IPO plan once the arbitration case with our financial investors is resolved,” he said.