South Korean shares have plunged on worries about the profitability of AI investments, adding uncertainty for AI startups pursuing initial public offerings. Alice Group recently drew more than 10 trillion won in subscription deposits in its retail offering. Attention is on whether follow-on candidates Rablup and Xenon can sustain investor interest.

On Oct. 19, the industry said Alice Group will list on the KOSDAQ on Oct. 20. Rablup wraps up institutional bookbuilding that day, and Xenon is set to begin bookbuilding later this month.

With the companies' offering processes moving into full swing, investors are watching whether the sharp drop in local stocks will weigh on sentiment in the IPO market.

On Oct. 15, the KOSPI and KOSDAQ indexes each fell more than 8 percent intraday, triggering circuit breakers in both markets. The moves were seen as driven by a U.S. consumer price index reading that topped market expectations and renewed worries that profit generation is insufficient relative to the scale of AI infrastructure investment.

Investors are also watching whether the drop in U.S. AI and semiconductor-related shares spreads into changes in how investors value AI companies in South Korea. Institutional demand forecasts that determine IPO prices can be influenced not only by performance and growth prospects, but also by market conditions and investor sentiment.

Earlier, Alice Group posted solid results in its offering process conducted before the market selloff.

In bookbuilding held from Sept. 23 to Oct. 1, Alice Group recorded a 388.8-to-1 competition ratio. A total of 2,367 institutions at home and abroad participated, and the offering price was set at 90,500 won, the top of the indicative range.

In the retail subscription held on Oct. 7 to 8, it recorded a 408-to-1 competition ratio. Subscription deposits totalled 10.2599 trillion won.

Alice Group is growing around its NeoCloud business. It plans to use the about 201.1 billion won raised in the offering to build AI data centres and GPU infrastructure.

But market conditions shifted abruptly right after the retail subscription, putting the focus on its share price performance after the Oct. 20 listing. A key question is whether the demand seen during the offering process will continue after listing.

Follow-on candidate Rablup runs institutional bookbuilding from Oct. 13 to that day.

Rablup developed the platform "Backend.AI" to integrate and manage AI computing resources such as GPUs. It is offering 2.18 million shares, with an indicative price range of 19,000 to 22,000 won. The expected offering size is 41.42 billion won to 47.96 billion won.

Earlier, in the process of revising its securities registration statement following a correction request from the Financial Supervisory Service in September, Rablup lowered its indicative price range to 19,000 to 22,000 won from 20,000 to 23,000 won. The adjustment was made before the latest stock market plunge.

Rablup plans to set its offering price on Oct. 21 and hold a retail subscription on Oct. 22 to 23.

Enterprise AI transformation (AX) solutions company Xenon is also preparing its follow-on offering process.

Xenon submitted a securities registration statement to the Financial Services Commission on Oct. 8 and began procedures to list on the KOSDAQ. The total number of shares on offer is 2.2 million, with an indicative price range of 9,700 to 12,200 won. The expected offering size is 21.34 billion won to 26.84 billion won.

Xenon plans to run institutional bookbuilding on Oct. 26 to 30 and hold a retail subscription on Nov. 4 to 5. It supplies generative AI solutions to corporate markets including finance and the public sector based on its self-developed AX platform "GenOS."

As market volatility has risen recently, companies seeking listings are watching conditions while putting more weight on strengthening their core competitiveness.

An official at one AI company preparing to list said, "It would have been better if market conditions were good, but we have no choice but to watch now." The official said, "There is no change in fundamentals, so we will focus on using the funds secured through the offering well to push ahead with the planned business."

In the securities industry, an analysis says there are signs institutional investors are tightening their screening of IPO candidates.

A report titled "Third-quarter IPO market analysis and outlook" released on Oct. 6 by Park Jong-seon (박종선), a research fellow at Eugene Investment & Securities, said 68.8 percent of companies in the third quarter set offering prices at or above the top of their indicative ranges, down from 100 percent in the fourth quarter of last year.

Park said, "As corporate value and the amount of shares available for trading upon listing influence institutional investor sentiment, screening of IPO companies is being strengthened," while adding, "The fourth-quarter IPO market will show a recovery."