The Financial Supervisory Service (FSS) announced on the 23rd that, as a follow-up measure to the 'Improvement Plan for the Technology Special Listing System,' it has reviewed the disclosure status of specially listed companies and revised the formats of securities registration statements and business reports related to performance estimates when calculating the public offering price.
According to the FSS, when the public offering price is calculated based on estimated future operating performance, the securities registration statement must include the basis for the estimates. Additionally, after listing, the business report must compare the estimated figures with the actual results, and if the deviation rate exceeds 10%, the reasons must be described in detail.
However, there have been criticisms that many cases involve excessively high estimates of future performance without reasonable grounds, leading to inflated public offering prices. The review of business reports revealed many cases of insufficient disclosure of deviation rates, and significant company-by-company differences in the methods and levels of detail in preparing and describing estimates and actual results, indicating a need for standardization of reporting formats.
Accordingly, the FSS has introduced detailed disclosure requirements for the basis of public offering price calculations to encourage reasonable pricing and to help investors better understand disclosures related to estimated performance in securities registration statements and business reports. It has also prepared specific preparation guidelines regarding the causes of discrepancies between estimated and actual operating performance.
First, the format of the securities registration statement was revised at the stage of public subscription. A new summary table for public offering price calculation was created to make it easier to verify information used in the calculation, such as operating profit, price-to-earnings ratio (PER) of comparable companies, and discount rates. Additional guidance was added to direct readers to refer to underwriters' opinions for detailed information on the public offering price calculation.
Furthermore, the basis for the public offering price calculation, such as operating profit and comparable company PER, must be described separately by item. When estimated figures are used, the basis for the estimates must be detailed by revenue source, and key grounds must be presented in keyword form.
At the post-listing performance verification stage, the business report format was revised. It now requires detailed analysis results on the main reasons, proportions, and causes of deviation rates, and the preparation format was standardized to follow the classification in the revised securities registration statement format to facilitate easy identification of the causes of deviation.
The scope of disclosure regarding the deviation rate between estimated and actual performance at the time of public offering was also expanded to include not only specially listed companies but also general companies.
The FSS advised issuing companies and underwriters to reasonably estimate future operating performance based on accurate supporting data when calculating the public offering price, and to provide detailed descriptions of the grounds and judgment processes used in the estimates in the securities registration statement.
Regarding the deviation rate between estimated and actual figures, if future operating performance is estimated in an initial public offering (IPO) registration statement, the predicted and actual figures for the past three fiscal years and their deviation rates must be disclosed. If the deviation rate exceeds 10%, a detailed analysis of the causes must be included.
For investors, since various data and assumptions are used for estimates, it is important to thoroughly review the detailed grounds for the estimates disclosed in the securities registration statement before making investment decisions. Additionally, investors should refer to the deviation rate status and causes disclosed in the business report when making investment judgments about the company.
An FSS official explained, "The revised securities registration statement format will be applied immediately from the effective date of the 24th of this month, and the revised business report format will be applied when companies that have submitted the revised securities registration statement and been listed submit their business reports."
He added, "We will hold disclosure explanation sessions for specially listed companies to educate them on 'common deficiencies and precautions in preparation' related to business reports, and in future reviews of securities registration statements, we will focus on checking whether the revised formats have been properly followed."
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