This article was posted on the ChosunBiz MoneyMove site on March 11, 2025, at 6:06 p.m.
Korea Investment & Securities, regarded as a 'leader in initial public offering (IPO),' is focusing on maximizing excess returns by securing equity in companies expected to go public, beyond the competition for underwriting. This decision stems from the judgment that it is difficult to secure target revenue with underwriting fees alone, and it is said that investments have been raised to internal performance indicators (KPIs).
According to the financial investment industry on the 11th, Korea Investment & Securities' IB1 division has recently secured the shareholder lists of companies that are expected to undergo preliminary listing reviews. This is aimed at securing equity before the IPO of these companies, and it is known that there are extensive requests for shares from venture capital (VC) firms within the shareholder lists.
The IB1 division of Korea Investment & Securities is an organization responsible for underwriting IPOs within the IB Group, which consists of five divisions. Since 2017, about eight years ago, the IB1 division has engaged in equity investments in companies expected to go public using its own capital, but the recent investment approach has become more aggressive.
A source in the securities industry noted, "I understand that Korea Investment & Securities has set a KPI for RM-level staff in the IB1 division to include more than two pre-IPO investments by other companies this year," adding, "As a result, the focus has shifted from IPO operations to investments, changing the core of sales to investments as well."
The securities IPO division's efforts to secure equity in companies expected to go public have been active since 2016. This came after financial authorities allowed financial investment firms to register as new technology business financing companies to encourage investment in small and medium-sized enterprises. Subsequently, securities firms have utilized equity investment as an extension means of pre-selection prior to selecting lead underwriters.
Recently, there have been cases of establishing separate investment teams within the IPO division. This method independently invests private equity (PI) related to IPOs, functioning to support the competitive underwriting of the IPO management organization while also enabling the sale of held equity post-listing for profit.
Analysis suggests that the IB1 division of Korea Investment & Securities has effectively transitioned into a startup investment division. While Mirae Asset Securities and Samsung Securities have established separate teams to discover promising companies ahead of their public listing, they have not participated in the pre-IPO efforts of their competitor securities firms to secure equity.
The demand for revenue improvement directed at the IB1 division has led to such changes. It is reported that Kim Seong-hwan, who has experience in real estate finance and became CEO last year, directly demanded revenue improvement for the IB1 division. Despite entering into multiple underwriting contracts, the low listing success rate and minimal commissions contributed to this demand.
A source in the VC industry stated, "I understand that the target revenue set for the IPO organization at Korea Investment & Securities is quite high," adding, "As the sole underwriter, it is not possible to reach the target, which is why Korea Investment & Securities has been one of the securities firms with a long-standing interest in startup investments, and I have heard that this trend has intensified recently."
It is interpreted that Korea Investment & Securities' repeated failures in taking on 'big deal' mandates due to the FADU and INNOGRID situations have also influenced its decision to expand investment operations. Rumors circulated that the Korea Exchange's listing review team has conducted particularly rigorous examinations of the companies that Korea Investment & Securities leads, leading to their exclusion from competitive underwriting.
The scale of the Korea Investment Partners' IB1 division has also decreased. Following the recent change in leadership from the latest Managing Director to Vice Managing Director Bang Hyun-cheol, it has been confirmed that four members of staff were recently reassigned. Considering that the IB1 division maintained about 50 personnel, this represents a loss of about 8%.
A source in the securities industry remarked, "Even with a dedicated IPO organization within Korea Investment & Securities, the revenue generated is not substantial, and I understand that there was a discussion about scaling down last year," adding, "The significant contraction in the IPO market during the second half of last year may have also contributed to organizational changes."
Korea Investment & Securities appears to be strengthening its IB3 division within the IB Group. The IB3 division aims to enhance the overall capabilities of its coverage department to increase its competitiveness in undertaking IPOs.
In relation to this, a representative from Korea Investment & Securities explained, "Strengthening equity investments in companies expected to go public is something that has been ongoing since the past."