South Korea’s SK shieldus, the No. 2 security company under SK square Co., Wednesday would be pricing its initial shares after two-day bookbuilding, but whether the IPO would succeed earlier SK blockbusters remains to be seen due to an overvaluation issue.

SK shieldus has set the indicative IPO price band at between 31,000 won ($24.61) and 38,800 won, which could capitalize its circulating shares at 3.5 trillion won at the top end and exceed industry No. 1 S-1 Corp. with a market value of 2.6 trillion won.

SK shieldus was created through the merger of ADT Caps and SK infosec in 2020. The company will list 90,340,282 shares on the Kospi market on May 19 after pricing is determined this week and initial shares are offered to retailers starting May 9.

SK shieldus responded to overvaluation claims by arguing its business model is different from S-1 since it provides a wider range of security services from physical security to cybersecurity.

SK shieldus’ security business however accounts for nearly 60 percent of its total earnings while its operation profit came to 1.5 trillion won and revenue at 121.9 billion won in 2021, smaller than S-1’s 2.3 trillion won in operating profit and 179.7 billion won in revenue. Ahnlab and S-1’s combined operating profit and revenue stood at 2.5 trillion won and 202.6 billion won, respectively.

SK shieldus must demonstrate strength in cybersecurity and maintain high profitability to rationalize its current valuation, said Choi Jong-kyung, an analyst at Heungkuk Securities.

Investors have grown disillusioned by hyped IPOs.

IPO stars of last year Kakao Bank and Krafton suffered loss of over 40 percent in their stock prices from their stellar debut as No.1 in their respective industries. They were also met with overvaluation concern at that time. Lotte Rental, which also debuted at No.1 in the car rental industry, lost 21 percent from its IPO price.

Its parent SK square’s shares have also been downhill ahead of IPOs of offspring.

Shares of SK square, which reached 59,200 won at the end of March, have been hovering around 51,000 won. SK square closed at 50,500 won, down 1.75 percent on Wednesday.

Other subsidiaries of SK square – No. 2 app store One Store and e-commerce platform 11Street - are in the IPO pipeline.

By Cha Chang-hee and Susan Lee

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