South Korea Introduces New IPO Regulations
South Korea's Financial Services Commission (FSC) announced new rules to stabilize initial public offerings (IPOs) by introducing cornerstone lockups. The government approved this new system on Tuesday, and it will take effect on November 13. Institutions that agree to a lockup period of at least six months will receive advance share allocations under this plan.
The FSC said that securing stable, long-term institutional buyers before pricing deals should boost investor confidence in IPOs. This change aims to tackle the issue of significant price drops after listings, known as the 'IPO price' problem. Recently, South Korea's stock market has seen sharp declines in share prices right after IPOs. For example, Elice Inc. experienced a notable 32% drop in its shares on its debut.
These new rules come during a tough year for IPOs in South Korea. Companies that listed in 2026 have seen a weighted-average decline of 32%. This is a stark contrast to the Kospi index, which has gained 38% during the same time. The FSC's initiative follows worries about tighter scrutiny of IPOs. This includes rules against duplicate listings that could hurt existing shareholders.
Hong Kong has already used a similar cornerstone investor system. This system allocates IPO shares in advance and requires a holding period. It aims to reduce market volatility and improve overall investor sentiment.
Related coverage: Bank of Korea Holds Rate at 3%, Signals Future Tightening.
The introduction of cornerstone lockups is likely to stabilize IPO pricing and cut volatility in South Korea's stock market. This could help upcoming IPOs and boost investor confidence, especially in sectors facing recent scrutiny.
Watch for the effects of these regulations on upcoming IPOs starting November 13. This is particularly important for companies aiming to attract institutional investors.
Based on reporting by: moneycontrol.com, livemint.com