Elice shares drop 33% in South Korea after IPO debut

In short: Shares of South Korean data centre builder Elice fell as much as 33% on their first day of trading, despite heavy demand for its IPO.

What happened

Elice, a South Korean company that builds and runs data centres for AI work, saw its shares drop to 61,400 won on Tuesday. That was far below its IPO price of 90,500 won. An IPO, or initial public offering, is when a company sells shares to the public for the first time.

The company raised about 201 billion won (about $151 million) in what was the biggest IPO on South Korea’s Kosdaq market this year. The deal drew strong interest from everyday investors. Investors put down more than 10 trillion won in deposits to apply for shares, and the retail portion was subscribed more than 400 times.

After the stock started trading, some retail investors posted worries about losses in online chat rooms. At the same time, South Korean chip stocks also fell. The Kospi index dropped 4.1%, with SK Hynix down 4.6% and Samsung Electronics down 3.3%.

Elice started in 2015 as a coding education service and later shifted to AI cloud infrastructure. Put simply, it provides the computers and networking needed to run AI, like renting out a powerful engine room for other companies’ AI software. Elice also says it can build modular data centres faster, and it uses liquid cooling to help high-performance chips avoid overheating.

Why it matters

Elice’s drop adds to growing doubts about how expensive AI related companies should be in the stock market. Analysts have pointed to higher interest rates, which can make it harder to fund big projects, and can make investors more cautious about long-term returns.

Source: Financial Times