Public Offering Price
Overview
The public offering price (공모가, Public Offering Price) is the price set when a company newly listing on the stock market first sells shares to general investors through an initial public offering (IPO). This price is determined by comprehensively considering the company's valuation, demand forecast results, market conditions, etc., and serves as the reference point for the stock price after listing. Properly setting the public offering price is crucial for both the issuer's successful capital raising and investor protection.
Main Content
Public Offering Price Determination Process
The public offering price is determined through three main stages.
1. Presentation of Desired Public Offering Price Range: The underwriter (securities firm) presents a range for the desired public offering price (e.g., 30,000–35,000 won) based on the company's financial status, growth potential, and comparison with similar companies.
2. Demand Forecast: Actual demand is surveyed among institutional investors within the desired range. Based on the prices and volumes proposed by institutions, the final public offering price is determined. The higher the demand forecast competition ratio, the more likely the public offering price will be set at or above the upper end of the range.
3. General Subscription: General investor subscriptions are conducted at the final confirmed public offering price. The general subscription competition ratio reflects market confidence in the appropriateness of the public offering price.
Relationship Between Public Offering Price and Post-Listing Stock Price
- Underpricing: Generally, the public offering price tends to be set lower than the post-listing stock price. This triggers a sharp rise in the stock price on the first day of listing (e.g., "dda-sang" or "dda-dda-sang" patterns), providing short-term profits to investors, but from the issuer's perspective, it reduces the amount of capital raised.
- Overpricing: Conversely, if the public offering price is excessively high, the stock price may fall after listing, leading to investor losses. Notable examples include Kakao Games in 2021 and Doosan Robotics in 2023, which sparked controversy.
Key Factors in Determining the Public Offering Price
- Company Valuation: Various methodologies such as PER (Price-to-Earnings Ratio), PBR (Price-to-Book Ratio), and EV/EBITDA are used to calculate the company's fair value.
- Demand Forecast Results: The participation rate of institutional investors and the distribution of proposed prices have the greatest impact.
- Market Environment: Overall investment sentiment in the IPO market, stock price trends in the same industry, and interest rate levels are reflected.
- Lock-up Commitments: If institutional investors commit not to sell shares for a certain period, it can positively influence the public offering price.
Systems Related to Public Offering Price
- Band (Desired Public Offering Price Range): The price range presented by the underwriter, which can be exceeded at the upper end based on demand forecast results.
- Lock-up Commitment Ratio: A system to reduce the circulating supply after listing and enhance stock price stability.
- Public Offering Price Stabilization Measures: Actions by the underwriter to buy shares to maintain the market price at or above the public offering price for a certain period after listing.
Recent Trends
In the Korean IPO market from 2024 to 2025, significant changes are occurring in the method of determining the public offering price. Since June 2024, the Financial Supervisory Service has strengthened its 'IPO Public Offering Price Calculation Practice Inspection,' requiring underwriters to more transparently disclose the basis for the presented desired public offering price range. Additionally, in 2025, 'Demand Forecast System Improvements' will be implemented, increasing the impact of institutional investors' lock-up commitment ratios on the public offering price. Notably, from the second half of 2024, cases of 'exceeding the upper end of the public offering price band' have increased, particularly prominent in 'IPO big fish' with explosive institutional demand (e.g., APR in 2024, LG CNS in 2025). Conversely, for some small and medium-sized IPOs, cases where the public offering price is set at the lower end of the desired range or even withdrawn are increasing, deepening polarization. Furthermore, starting in 2025, a pilot 'Individual Investor Participatory IPO' allowing individual investors to partially participate in demand forecasting has been introduced, democratizing the public offering price determination process.
Related Topics
- [[Initial Public Offering (IPO)]]
- [[Demand Forecast]]
- [[Listing Day Stock Price]]
- [[Underwriter]]
- [[Band (Desired Public Offering Price Range)]]
---
AI auto-generated document · Improved by the community