LG CNS IPO process gains traction

Offering price set at 61,900 won, valuing digital service firm at $4.14 bil.

By Nam Hyun-woo

LG CNS’ initial public offering (IPO) is gaining traction, with the company setting its offering price at the high end of its desired price range. With subscriptions for retail investors set to open on Tuesday, there is growing interest in how much the stock price will surge on its debut day.

According to its regulatory filing, Monday, LG CNS finalized its public offering price at 61,900 won, the highest limit of the proposed range of 53,700 won ($37.01) to 61,900 won.

A total 2,059 institutional investors participated in the book building process, proposing their desired prices and number of shares. According to the company, the total amount of money proposed during the process reached 76 trillion won, with about 99 percent of them proposing over 61,900 won per share.

Since LG CNS will offer over 19.37 million shares, the company will be able to raise 1.2 trillion won ($823.55 million), which will be the biggest amount following LG Energy Solution’s lucrative IPO in 2022, which raised 12 trillion won. This will make LG CNS valued at approximately 6 trillion won.

Gaining interest is the closing price for the first day of its trading.

LG CNS provides system development, operation and cloud services based on its software capabilities, and is now expanding its business to digital transformation, cloud computing, smart factories and artificial intelligence (AI).

Since 2020, the company has been shattering records in its yearly revenues, with operating profit also showing a similar trajectory. Its sales grew by 66.8 percent from 3.36 trillion won in 2020 to 5.6 trillion won in 2023. The company also reported 3.54 trillion won in accumulated sales from January to September last year.

On Monday, the company said it signed a memorandum of understanding with U.S.-based Bear Robotics on developing logistics automation solutions based on autonomous mobile robots.

Hanwha Securities analyst Eom Su-jin said LG CNS is attractive in its solid revenue growth, transition to AI, sales outside of LG Group and high operating margin, noting that “the company’s business portfolio is expanding from supporting digital transformation to AI transformation.”

Weighing on LG CNS’ price is investors’ concerns that the 50 percent of shares offered through the IPO are existing shares. This means that the IPO may benefit exiting investors instead of being a resource for the company’s investment.

The 50 percent of the shares which will be offered for the IPO are held by a special purpose company set up by Macquarie Private Equity. The company, named Chrystal Korea, is the second-largest shareholder in LG CNS.

Due to this structure, analysts often compare LG CNS’ IPO with that of HD Hyundai Marine Solution, which comprised 50 percent of its offering with existing shares. Upon its debut in May, the ship parts company saw its share price end up rising 96.52 percent on the first day of its trading, a disappointing increase given that many newly listed stocks doubled or even quadrupled during their debut.

In response to these concerns, LG CNS’ largest shareholder, LG Corp., and Chrystal Korea decided to lock up their holdings — 67.51 percent of all LG CNS shares — for six months following the IPO, which will address fears that an additional chunk of shares may be put up for sale shortly after the listing.

“We would like to express a deep gratitude to institutional investors who have highly evaluated LG CNS’ potential for future growth as a leader in customers' digital transformation,” LG CNS CEO Hyun Shin-gyoon said in a statement.

“Through this IPO, we aim to further enhance our technological capabilities and actively expand our global operations to lead the global AI transformation market.”