It’s a thin ice plate in the stock market… “Can you put it in?” SK Bioscience subscription with growing concerns

In the aftermath of the rise in US Treasury yields, stock markets around the world are on the ice, and individual investors weighing in on the participation of SK Bioscience’s public offering stocks are in confusion. Earlier, there was a controversy over overvaluation in the selection and valuation method of comparative companies for calculating the public offering price, and there is growing concern that the attractiveness of the offering price may not be as large as expected due to the recent decline in the stock price of comparative companies.

According to the electronic disclosure of the Financial Supervisory Service on the 6th and the Korea Exchange, SK Bioscience, which is about to sign a public offering for general investors on the 9th to 10th, is a company to be compared to determine the public offering price. We selected 3 companies specializing in consignment production (CMO), including WuXi Biologics. The stock price based on the calculation of the public offering price was the average of the closing price for three months from November 2nd last year to February 1st this year. The three-month average stock price of the three companies is △Lonza 574.47 Swiss Franc (CHF) △Samsung Biologics 790,965 won △Wuxi Biologics 90.09 Hong Kong Dollars (HKD).

In recent months, as stock markets at home and abroad have fallen together, the stock prices of the three comparable companies of SK Bioscience have also declined. Lonza’s share price was 533.40 Swiss francs based on the closing price on the 5th, down 7.1% from the average stock price calculated at the public offering price. The share price of Samsung Biologics, which is the target of domestic comparison, declined even more. Samsung Biologics, based on the closing price on the 5th, was 719,000 won, down 10.1% from the comparative standard stock price for SK Bioscience’s public offering price of 79,9651 won. Wuxi Biologics fell 0.7% to 89.50 Hong Kong dollars on the 5th. The stock prices of the three companies fell by an average of 6.0% compared to the stock price based on the calculation of the public offering.

SK Bioscience, which has predicted the demand for institutional investors to determine the public offering price for two days on the 4th-5th, is expected to finalize the public offering price on the 8th. SK Bioscience set the appraisal amount per share at 82,267 won through the analysis of’enterprise value compared to production capacity (EV/Capacity)’ with comparative companies. The desired public offering price band will be set at a rate of 49,000 won at the bottom to 65,000 won at the top by applying a discount rate of 20.99 to 40.44% from the evaluation per share. However, the actual discount rate is inevitably lowered by about 6 percentage points from the 20-40% level contained in the public offering investment prospectus due to the recent decline in the stock prices of comparative companies. For investors, the safety margin decreases and the investment risk increases.

Earlier, concerns have been raised in the market over the EV/Capacity comparison method that SK Bioscience chose to calculate the public offering price. Most newly listed companies use a stock price-to-earnings ratio (PER) comparison method when calculating the offering price. It explained that NH Investment & Securities, which is the representative organizer of the listing, and Korea Investment & Securities, and Mirae Asset Daewoo, which are co-organizers, used the EV/Capacity comparison method, not PER, to properly reflect the corporate value that is expected to increase significantly in the future rather than the current figures did. This is a convincing point in that the future value of bio companies can increase significantly in the corona 19 phase.

SK Bioscience applied 2.64 times the standard EV/Capacity value for calculating the public offering price. What is worrisome is that the EV/Capacity value of the comparable companies is low at 1.27 times for Lonza and 1.44 times for Samsung Biologics, while only Wuxi Biologics, a Chinese company, has raised the average value by 5.21 times. If Wuxi Biologics was not included, the corporate value of SK Bioscience could have been reduced to half of the amount indicated in the current investment prospectus.

Nevertheless, in the market, optimism is prevailing that there is nothing to lose by participating in the subscription to SK Biosciences public offering stock. Even in the recent prediction of demand for institutional investors, there are observations that the offering price will be determined at the top of the desired band due to active participation of institutions. An official in the financial investment industry said, “It is clear that there is a controversy over the public offering price, but considering the recent high interest and expectations for bio stocks, it would be advantageous for investors to participate in the subscription.”

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