LG Energy Solution’s IPO attracts strong demand from foreign investors Korean EV battery maker receives tens of times more orders than allotment
Translated by Ryu Ho-joung 공개 2022-01-10 08:11:19
이 기사는 2022년 01월 10일 08:07 thebell 에 표출된 기사입니다.
LG Energy Solution’s planned initial public offering has been met with strong interest from institutional investors, with the South Korean electric-vehicle battery maker already securing tens of times more orders than the shares allotted for foreign institutions even before the book-building period began.The IPO is expected to be the largest ever in South Korea. The battery maker could raise as much as 12.75 trillion won ($10.6 billion) at the upper end of the price range of 257,000 won to 300,000 won each, with 55% of the deal size allocated to institutional investors.
The offering period for overseas institutional investors started on January 3 and will end on January 12. Subscription for domestic institutions will open on January 11 and close on the following day.
However, according to sources, LG Energy Solution has already built the IPO order book that is tens of times oversubscribed for foreign institutions even before the offering period began. It is a common practice for foreign institutional investors to place orders in advance in large South Korean IPOs in order to buy more IPO shares.
The battery maker allocated 22.1 million shares, or 52% of the total offered shares, to overseas institutional investors. It is said that most of the pre-orders were placed at the top of or higher than the price range.
Orders have reportedly continued to roll in since the company started taking orders on January 3. “The success of LG Energy Solution’s IPO has been widely expected, with the listing plan attracting strong attention from both domestic and foreign investors from the beginning,” an investment banking source said.
Cheaper valuation
It seems investors are attracted to the company because of cheaper valuation as well as the growth potential of the EV battery market, industry watchers said.
LG Energy Solution is the world's second largest EV battery maker with a 23.8% market share, after China’s CATL with a 31.8% share.
However, the South Korean battery maker's market capitalization is estimated to be up to 70.2 trillion won based on the price range, less than one-third of CATL’s market value of 236 trillion won as of the closing price on January 5.
LG Energy Solution also has a diversified customer base, with Asia and Europe representing 40% each of the company’s total revenue. In comparison, CATL generates more than 80% of its revenue from Chinese companies.
“There is no doubt that LG Energy Solution’s stock will see an upward movement after the IPO as it is likely to be included in major indexes such as Kospi 200 Index and those from MSCI,” another investment banking source said. “Investors do not seem much concerned about the recall issues.”
KB Securities and Morgan Stanley are acting as lead underwriters. Co-lead managers are Shinhan Investment, Daishin Securities, Citigroup Global Markets Securities, Goldman Sachs and BofA Securities. (Reporting by Seok-cheol Choi)
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