Seoul: South Korea's financial regulator announced plans to enhance regulations for institutions' investment in newcomers on the stock market. This initiative is part of broader efforts to improve related regulations.
According to Yonhap News Agency, the Financial Services Commission (FSC) outlined that starting next year, over 40 percent of initial public offering (IPO) shares will be first allocated to institutional investors who commit to holding the shares for a predetermined period, typically three or six months. This is a significant increase from the current practice, where over 20 percent of IPO shares are sold to such institutional investors to facilitate a smooth market debut for new companies.
The FSC's decision comes in response to criticisms that some institutional investors have been capitalizing on quick profits by selling IPO shares on their first trading day. In addition to the IPO regulations, the FSC aims to strengthen delisting rules to ensure a faster exit for companies that fail to meet required standards.
From 2029, companies with a market capitalization below 50 billion won (US$3.47 million) and revenues under 30 billion won will be delisted from the main bourse. Currently, a company's delisting occurs when its market capitalization or sales fall below 5 billion won. Furthermore, the delisting process period will be reduced to a maximum of two years, down from the existing four years. Companies receiving inappropriate audit reports for two consecutive years will face immediate delisting, as per the FSC's new guidelines.