Doosan Bobcat Inc., a unit of South Korea’s Doosan Infracore, cancelled plans for an initial public offering after the valuation fell short of its targets. The company had hoped to reach up to $2.2 billion. It is expected to relaunch a smaller IPO within days.
The company will withdraw its proposal and submit a revised plan soon, according to a regulatory filing. It expects to list shares in November or January, instead of its earlier planned Oct. 21, the company said in an e-mailed statement.
“There were concerns that the IPO was priced too high and there were too many shares being sold,” said Lee Jae Won, an analyst at Yuanta Securities Korea Co. in Seoul. “The stock market has been trading in a narrow range these past few years, so investors are wary about any stock that’s offered at what they believe is a high valuation.” Doosan Bobcat set its preliminary pricing range by comparing with global peers such as Caterpillar Inc and Komatsu Ltd.
Bloomberg.com reports this is the second pull back of an IPO in South Korea. In June, Hotel Lotte Co. dropped its 5.26 trillion won offering even after lowering the sale price.
Doosan Infracore shares slumped as much as 13 percent to their lowest intraday level in over 3 months on Monday after the news.
“There were too many shares being offered and a few issues that didn’t meet market conditions,” Doosan Bobcat said in the statement. “While there was demand, we were unable to come to an accord that satisfied those involved. In that respect, we will re-look at the IPO structure, including the number of shares, to fit the market conditions and proceed with the IPO again.” Under South Korean exchange rules, Doosan Bobcat has until February 2017 to list or start the process over.
Doosan Bobcat posted 234.8 billion won in operating profit in the first half of this year and generated sales of 2.15 trillion won, the company said. Its operating margins widened to 10.92 percent in the first half, from 9.54 percent for 2015.
The IPO proceeds are earmarked to pay off Doosan Infracore debts. Doosan Infracore and affiliate Doosan Engine Co Ltd currently own a combined 78 percent stake in Doosan Bobcat.
Korea Investment & Securities Co. and JPMorgan Chase & Co. are leading the offering.