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IPO

South Korea's Hyundai Heavy shares soar in stock market listing

Leading shipbuilder sees future in developing green fuel technologies

Hyundai Heavy Industries plans to invest in green shipbuilding technologies, including ammonia and hydrogen-fueled ships and offshore hydrogen production facilities.   © Reuters

SEOUL -- Shares in Hyundai Heavy Industries nearly doubled from their initial public offering price after listing Friday on South Korea's benchmark stock exchange, as the world's largest shipbuilder by orders aims to invest in new environmentally focused technologies.

Hyundai Heavy had raised 1.1 trillion won ($934 million) in its IPO last week, offering 18 million new shares. It plans to spend 760 billion won of that on green shipbuilding initiatives, including ammonia and hydrogen-fueled ships and offshore hydrogen production facilities.

The company's stock price closed at 111,500 won in its first trading day on the benchmark Kospi index, up 91.7% from its IPO price of 60,000 won after having surged as high as 135,000 won.

The shares had opened at 111,000 won before dropping to as low as 91,000 won in early trading, but gradually recovered.

The company's market capitalization stood at 9.9 trillion won at the end of the day, making it the 43rd largest component in the index.

Hyundai Heavy Industries, founded in 1972 by legendary South Korean businessman Chung Ju-yung, rapidly became a major force in global shipbuilding, later developing other businesses including the construction of offshore drilling platforms as well as engines and machinery.

One of South Korea's most important companies, the industrial giant recently has gone through a complicated corporate reorganization. It was previously listed on the Kospi, but in 2019 changed its stock name to Korea Shipbuilding and Offshore Engineering. Hyundai Heavy then became a subsidiary of KSOE, a holding company with other smaller shipbuilders under its wing.

Even after the IPO and new listing as Hyundai Heavy, KSOE still controls the company with a 79.7% stake. KSOE falls under Hyundai Heavy Industries Group which owns a 31% stake in KSOE. Chung Mong-joon, a former vice president of FIFA (the international soccer governing body) and a son of Chung Ju-yung, is the largest shareholder of the group with a 26.6% stake.

Since Hyundai Heavy accounts for most of KSOE's business, analysts worry that its listing may undermine the holding company's corporate value. "Hyundai Heavy's listing is a factor burdening KSOE as it cannot fully reflect the affiliate's value," said Lee Dong-heon, an analyst at Daishin Securities.

Hyundai Heavy posted an operating loss of 422.6 billion won in the second quarter because of setting aside large scale provisions as steel prices have soared. Continuing losses from the offshore engineering business also contributed to the poor performance, the company said.

Despite the huge losses, Hyundai Heavy enjoyed strong investor interest in its IPO as 1,633 institutional investors at home and abroad participated in the bidding.

"I appreciate institutional investors evaluating Hyundai Heavy Industries' capabilities and growth potential highly," CEO Han Young-seuk said in a statement.

South Korea has enjoyed a booming IPO market this year, led by game developer Krafton and digital lender Kakao Bank.

Analysts are expecting at least 20 trillion won to be raised in 2021, or about four times more than last year. Retail investor interest in IPOs has played a major role in boosting the market, eroding the traditional role of institutional investors.

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