Financial Services Commission and Korea Financial Investment Association to Hold Public Hearing on IPO System Reform This Month
Growing Caution Over Expanding Individual Allotments Amid Concerns of Increased Damage
On the 6th, the last day of the general public subscription for shares of Big Hit Entertainment, the agency of the group BTS, individual investors were receiving subscription consultations at the Korea Investment & Securities headquarters sales department in Yeongdeungpo-gu, Seoul. After the general public subscription ends on this day, Big Hit is scheduled to be listed on the KOSPI market on the 15th. Photo by Moon Honam munonam@
[Asia Economy Reporter Han Jinju] As Big Hit Entertainment's stock price plummeted immediately after its listing, financial authorities will hold a public hearing ahead of preparing a reform plan for the initial public offering (IPO) system.
According to financial authorities and the financial investment industry on the 1st, the Financial Services Commission and the Korea Financial Investment Association will hold a public hearing this month to gather market opinions on expanding the allocation of shares to individual investors in public offerings.
Financial authorities have been exploring reforms to expand the allocation of shares assigned to small investors following the IPO subscription frenzy seen with SK Biopharm, Kakao Games, and others. However, due to concerns that premature reforms could increase losses for small investors, they have decided to listen to opinions first.
According to the Korea Financial Investment Association regulations, at least 20% of the public offering shares of listed companies must be allocated to the general public (individual investors). High-yield funds and employee stock ownership associations must be allocated at least 10% and 20%, respectively, with the remainder going to institutional investors.
To favor small subscribers, financial authorities have been considering ▲allocating half of the individual investor shares to small investors ▲prohibiting multiple account subscriptions ▲prioritizing individual investors for forfeited employee stock ownership shares previously allocated to institutional investors. This reflects criticism that high-net-worth individuals and institutional investors have benefited in the public offering market.
Financial Services Commission Chairman Eun Sung-soo stated at a meeting with the securities industry last August, "The current individual investor allocation method, where those who pay more subscription deposits receive more shares, favors high-net-worth individuals and needs improvement."
Following Big Hit's listing, the stock price plunged due to institutional profit-taking sales, strengthening cautious views within financial authorities. There are concerns that expanding individual allocations during a subscription frenzy could cause significant side effects. If the door to the public offering market opens wider for individuals who relatively lack access to corporate analysis or information, the scale of damage could inevitably increase.
The Financial Services Commission plans to gather expert opinions not only on the allocation method of public offering shares but also on the overall IPO system.
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