Baek Jong-won’s company, The Born Korea, is set to go public on the KOSPI market tomorrow. The securities industry suggests that The Born Korea’s stock price might increase due to a lower “overhang” risk, given the limited number of shares available, and improving investor sentiment following the abolition of the financial investment income tax.
However, there are concerns about the recent poor performance of IPOs. Companies like HEM Pharma, which went public on the 4th, have failed to maintain their offering prices. The Born Korea has also been criticized for its high offering price, and a significant number of employees did not participate in the employee stock subscription, which is seen as a downside.
According to the Korea Exchange, The Born Korea’s shares will begin trading on November 6. Food and distribution analysts consider the timing to be favorable. An analyst from Company A stated that the company’s value is closely tied to Baek Jong-won’s popularity, which has surged with the Netflix series “Chef in Black and White,” potentially boosting interest in the stock.
The agreement by Lee Jae-myung, leader of the Democratic Party, to abolish the financial investment tax is also considered positive news. A researcher from Company B commented that The Born Korea has chosen a good listing date, enhancing its appeal to individual investors with the formalization of the tax abolition.
The limited number of tradable shares after the listing, 2,845,200 shares, representing 19.67% of the total shares, is also viewed positively. There are opinions that The Born Korea’s potential for international expansion is highly regarded. According to Han Yoo-jung from Hanwha Investment & Securities, The Born Korea plans to focus on its overseas business by adopting a master franchise strategy, with a likely launch of Korean Chinese or snack brands in Europe by 2025, which could enhance B2B sauce sales through domestic and international business expansion.
An asset management company CEO specializing in IPO investment offered an optimistic outlook, suggesting that since IPOs are popularity contests more than evaluations of intrinsic value, the popularity of CEO Baek Jong-won would lead to The Born Korea’s market success. He added that the initial trading price is crucial; if it exceeds the offering price, interest will continue to grow. Conversely, should the initial price fall below the offering price, which he sees as unlikely, the firm plans to acquire more shares.
Nevertheless, criticisms about the excessively high offering price persist. The Born Korea, using CJ Seafood, Daesang, Pulmuone, and Shinsegae Food as comparison companies, set its offering price range (band) between KRW 23,000 and KRW 28,000 based on their average price-to-earnings ratio (PER) as of the end of June.
The PER-based stock prices of CJ Seafood at KRW 3,470, Daesang at KRW 21,310, Pulmuone at KRW 11,580, and Shinsegae Food at KRW 36,100 were all below this range. This suggests that, in hindsight, the offering price could have been set lower.
The confirmed offering price of The Born Korea exceeded the band at KRW 34,000, as 99.73% of the 2,216 domestic and foreign institutions participating in the demand forecast specified prices at or above the upper range.
Despite successful demand forecasting and general investor subscriptions, the employee stock ownership subscription ratio was a mere 0.35:1, raising concerns. The allocation for employee stock ownership is under a one-year lock-up period, preventing sales after listing unless the employee resigns, implying that insiders might lack confidence in long-term profitability.
Additionally, recently listed stocks have consistently underperformed. According to the Korea Exchange, all 8 recently listed stocks (excluding SPACs) traded below their offering prices on their first day, with an average decrease of 24%. This contrasts sharply with the first half of the year, when all 41 newly listed stocks traded higher on their debut, averaging a 91.4% increase.
Hana Securities researcher Shim Eun-joo advised that The Born Korea may lack short-term valuation appeal and should be approached from a medium- to long-term perspective. She noted that while the company’s direction for growth through overseas expansion, domestic development synergies, and sauce manufacturing and distribution is clear, actual revenue generation will take time to materialize.