Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Companies cautious about going public despite bull market
The Korea Exchange (KRX) building in Seoul's financial district of Yeouido / Yonhap
By Yi Whan-woo
Not a single company moved toward initial public offering (IPO) so far this month — a surprise considering the stock market has been bullish and supposedly offers a favorable atmosphere for IPOs, government data showed Wednesday.
Industry officials said unlisted companies are prudent about going public due to toughened rules on IPOs, which took effect on July 1 to prevent fraudulent firms from deceiving investors.
Data compiled by the Financial Supervisory Service (FSS) showed that the financial watchdog has not received any submissions of a required preliminary document for an unlisted company to go public since July 1.
The document, called a securities registration statement, includes detailed information about the company, its operations, financial health, management and associated risks, and enables potential investors to make informed decisions.
Prior to an IPO, companies should submit a preliminary review application to the Korea Exchange.
The company must also undergo other processes, such as institutional investor-led demand forecasting, public offering subscription and allotment, before officially being listed on the stock market.
“The fact that no companies filed a securities registration statement with the FSS is odd at a time when the stock market is rallying,” an industry official said.
He noted the benchmark KOSPI closed above 3,000 points for the first time in over three and a half years on June 20.
The official said Korea’s total stock market capitalization from KOSPI, secondary bourse Kosdaq and KONEX — a securities exchange for small and medium-sized businesses and venture companies — surpassed 3,000 trillion won ($2.17 trillion) for the first time on July 10.
“Under the circumstances, the tightened IPO rule is believed to be behind unlisted companies being cautious about making a market debut,” he said.
Seven unlisted companies submitted securities registration statements from June 16 to 27, compared to five for May. Industry officials believe that the seven rushed their IPO processes before the new regulations took effect.