SEOUL -- Shares in Hyundai Heavy Industries nearly doubled from their initial public offering price Friday after listing on South Korea's benchmark stock exchange before paring gains, as the world's largest shipbuilder by orders aims to invest in new environmentally focused technologies.
Hyundai Heavy's stock price were at 94,000 won in early trading, up 56.7% from its IPO price of 60,000 won. Hyundai Heavy had raised 1.1 trillion won ($940 million) in its IPO last week, offering 18 million new shares. The company plans to spend 760 billion won of that on green shipbuilding initiatives, including ammonia and hydrogen-fueled ships and offshore hydrogen production facilities.
The stock price had opened at 111,000 won on the benchmark Kospi index, nearly doubling from the IPO price. Its market capitalization stood at 8.4 trillion won at the latest trading price.
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.