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'First Direct Listing in 2 Years' Hanwha Investment & Securities Compensates for Pescaro IPO Allotment Errors

[비즈한국] It has been confirmed through Bizhankook's coverage that Hanwha Investment & Securities003530 recently began compensation procedures after an allotment error occurred during the Pescaro IPO subscription process for retail investors. While it was initially predicted that retail investors participating in the subscription had a 76% chance of receiving an equal allotment, the actual results showed that the equal allotment rates for subscribers of certain quantities deviated significantly from this figure. Pescaro is the first company for which Hanwha Investment & Securities has managed a direct listing in two years, and it is reported that the brokerage has put significant effort into the listing.

According to the industry, Hanwha Investment & Securities compensated 31,500 won each to retail investors who did not receive their IPO shares due to an allotment error during the Pescaro subscription process on the 12th. This amount was calculated by subtracting the IPO price of 15,500 won from the daily high of 47,000 won on the day of Pescaro's listing, essentially compensating investors as if they had received the shares and sold them at the highest price on the listing day. Pescaro, an automotive security specialist, went public on the KOSDAQ market on the 10th, recording a daily high of 47,000 won during the session before closing at 27,100 won.

Hanwha Investment & Securities is the lead manager for the Pescaro listing. In February last year, it was selected as a co-lead manager alongside NH Investment & Securities005940 to manage the Pescaro Initial Public Offering (IPO). Of the 1.3 million new shares offered by Pescaro, 975,000 shares (75%) were underwritten by NH Investment & Securities, and 325,000 shares (25%) were underwritten by Hanwha Investment & Securities. For each firm, 75% of the underwritten volume was allocated to institutional investors, while 25% was allocated to retail investors. Previously, Pescaro's IPO price was set at the top end of the희망 price range at 15,500 won, following the results of institutional investor demand forecasting.

The Pescaro IPO subscription for retail investors was a success. Following the two-day subscription period that began on the 1st, a total of 464.63 million shares (301,113 orders) were submitted for the 325,000 shares available, resulting in a competition ratio of 1,430 to 1. The total subscription deposits collected amounted to 3.6 trillion won. NH Investment & Securities saw 347.63 million shares (247,868 orders) submitted for its 243,750-share offering, a ratio of 1,426 to 1, while Hanwha Investment & Securities recorded a competition ratio of 1,440 to 1, with 117 million shares (53,245 orders) submitted for 81,250 shares.

However, fairness concerns arose regarding the equal allotment results for the Hanwha Investment & Securities portion. According to the investment prospectus, half of the retail portion of Pescaro shares are allocated equally and the other half proportionally. Equal allotment refers to a method where shares are distributed equally (1/N) to all subscribers who applied for at least the minimum required amount. In cases where there are more subscribers than available shares, it is standard to use a lottery system to allocate 1 share. This is contrasted with the proportional allotment method, where a higher number of subscribed shares leads to a larger share allocation.

The number of retail subscription orders for Hanwha Investment & Securities (53,245) exceeded the shares designated for equal allotment (40,625 shares). If one share had been randomly allocated via a lottery, subscribers would have had a 76% chance of receiving an equal allotment. However, the actual results showed that the equal allotment rates for certain groups of subscribers significantly exceeded or fell below the overall average rate (76%). For instance, among subscribers who applied for 5,200 shares, only 90 out of 481 (19%) received an equal allotment, whereas among those who applied for 10 shares, 24,826 out of 29,968 (83%) received an equal allotment.

Hanwha Investment & Securities disclosed that it had randomly distributed the equal allotment portion for retail investors. In the securities issuance report on the 4th, the company stated, "We allocated the 81,250 retail shares into 40,625 (50.0%) for equal allotment and 40,625 (50.0%) for proportional allotment," adding, "Since the number of subscription orders (53,245) was greater than the shares available for equal allotment (40,625), we allocated 1 share randomly to all participants."

Meanwhile, Hanwha Investment & Securities did not respond to Bizhankook's inquiry regarding the specific number of shares erroneously allotted, the number of people eligible for compensation, and the total scale of the compensation. However, assuming that all 12,620 subscribers who failed to receive their equal allotment were compensated 31,500 won each, the total compensation scale is estimated to be around 400 million won.

Pescaro is the first company Hanwha Investment & Securities has managed for a direct listing in two years. Since managing the IPO of E8 in May 2023, the brokerage had only been handling listings for Special Purpose Acquisition Companies (SPACs). The SPACs managed in the meantime include Hanwha Plus No. 4 SPAC in June 2023, Hanwha Plus No. 5 SPAC in December last year, and Hanwha Plus No. 6 SPAC in November of this year. It is reported that Hanwha Investment & Securities has put long-term effort into the Pescaro listing, including participating as a financial investor during the capital raising process.

A Hanwha Investment & Securities official stated, "Through an inspection of the allotment process for the Pescaro IPO, we confirmed cases where shares were not allotted normally to some customers. After informing those customers, we promptly completed compensation at a reasonable level," adding, "We will strengthen the inspection of our allotment processes and systems to prevent recurrence and make thorough improvements."