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Golden Brown | Getty Images Shares in South Korean AI services firm Elice Group plummeted 30% in their market debut on Tuesday, amid a sharp retreat in sentiment towards the sector that has also derailed other planned listings. Elice, which raised 201.1 billion won ($150 million) in its IPO, provides AI cloud services as well as AI-based education and business software and plans to spend most of its IPO proceeds on launching portable modular data centers and related infrastructure. Investors are increasingly questioning whether massive AI spending can pay off anytime soon as elevated inflation keeps borrowing costs high.
Analysts noted that Elice's IPO had been priced on Oct. 6, before the recent sell-off in AI-related stocks. "Elice's debut shows the AI infrastructure trade has moved from 'build at any cost' to 'who is paying and for how long'," said Ke Yan, head of research at Singapore-based Shenton Research. "Until the AI labs that rent ... capacity show they can fund their compute commitments, new listings across the region will likely be priced in that risk premium." This month, data center firms that have shelved their IPO plans include Australia's Firmus, which is backed by Nvidia, Blackstone-backed AirTrunk, which postponed a Singapore REIT IPO, as well as SB Energy, a unit of Japanese tech investment conglomerate SoftBank, which had filed paperwork for a U.S.
IPO. "Everyone is not sure how much demand for AI there will be and it is hard to estimate current demand," added Kim Hak-joon, an analyst at Seoul-based Kiwoom Securities. Elice's shares were last trading at 63,600 won compared with its IPO pricing of 90,500 won.
The IPO drew institutional orders worth 388.84 times the shares available in the offering, according to a filing. The company has said revenue for the first half of the year tripled to 34 billion won and that it swung to an operating profit of 10 billion won compared with a 3.5 billion won loss for the same period a year earlier.
Source: CNBC
