With the initial public offering (IPO) market remaining sluggish this year, Korean brokerages are stepping up efforts to secure capital gains through pre-IPO investments in addition to underwriting fees. The strategy involves acquiring stakes in promising companies before they begin the formal IPO process, then linking those investments to underwriting roles to pursue both fees and investment returns.
According to the investment banking (IB) industry Monday, Samsung Securities (016360.KS) is known to have reaped substantial valuation gains from its investment in rgenomics, which debuted on the KOSDAQ market last year. Samsung Securities acquired redeemable convertible preferred shares (RCPS) of rgenomics in 2022. After a series of bonus issues, stock splits, and conversions to common shares, its adjusted acquisition cost fell to about 10,990 won per share. As of Sunday, rgenomics shares traded at 174,500 won, meaning the brokerage logged capital gains exceeding 15 times its initial investment on a simple calculation.
Mirae Asset Securities (006800.KS) is also generating returns from pre-IPO investments, much like Samsung Securities. Mirae Asset Securities participated in a third-party allotment paid-in capital increase by AIMedBio, acquiring 230,017 shares at 5,217 won per share. As of Sunday, AIMedBio shares traded at 46,700 won, raising the value to about 8.9 times the investment price. Mirae Asset Securities is also known to have made a pre-IPO investment in CMTX.
IMBiologics, jointly underwritten by Korea Investment & Securities and Shinhan Investment, is another notable case. IMBiologics completed a 42.2 billion won pre-IPO funding round last October, with Korea Investment & Securities and Shinhan Investment listed as new investors in the process. Since its KOSDAQ listing in March this year, IMBiologics shares have risen more than 78% from the offering price.
Brokerages' pre-IPO investments have grown more active recently. Samsung Securities is said to have executed seven pre-IPO investments this year alone. Mirae Asset Securities is also strengthening its strategy of discovering and investing in high-growth "rough gems" and connecting them to listings, including reviewing an investment in AI chip company DEEPX. Brokerages are also expanding their presence in large pre-IPO deals. Samsung Securities and Mirae Asset Securities took part in the pre-IPO round of AI chip company Rebellions, joining the competition to discover promising startups.
"As there are limits to revenue from underwriting fees, there are increasing cases of investing in promising companies to pursue capital gains," an IB industry official said.
