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| Korea Investment & Securities headquarters in Seoul / Courtesy of Korea Investment & Securities |
Local brokerage criticized over 'preferential treatment'
By Anna J. Park
Ahead of the planned IPO of KakaoBank, Korea Investment & Securities is receiving criticism from its local peers, as the company has secured the underwriting of a significant proportion of the internet-only bank's stocks compared to co-underwriters.
The brokerage company is one of three underwriting firms for Kakao Bank's IPO, along with Hana Financial Investment and Hyundai Motor Securities. However, Korea Investment's allotment of underwriting stocks ― 12.4 million shares ― is more than six times higher than that of Hana Financial Investment and nine times higher than the amount claimed by Hyundai Motor Securities.
KB Securities and Credit Suisse each underwrite 18 million shares ― the highest amount ― of the mobile bank's offering stocks, but that's because the two firms are the main underwriters of the bank's IPO process and they have handled much of the complicated work, including calculating the corporate value of the bank, unlike Korea Investment, which is merely one of the three co-managers of the process. Market insiders say Korea Investment's taking over of around 19 percent of the offering stocks in the IPO is unusual for IPO underwriting.
As Korea Investment gets to underwrite 19 percent of the offered stocks, the brokerage company is expected to garner massive commission fees six to nine times higher than its co-underwriters during the upcoming institutional and retail stock allotment process.
Market watchers speculate that the main reason behind why Korea Investment could secure the exceptionally large amount of Kakao Bank's stocks as an underwriter is the "special relationship" the brokerage company has with the mobile bank.
Korea Investment Holdings ― the parent company of Korea Investment & Securities ― and Korea Value Asset Management, an asset manager unit of the financial group, collectively hold 31.61 percent of KakaoBank's stocks, as Korea Investment Holdings owns 4.64 percent and Korea Value Asset Management has 26.97 percent. The aggregated amount held by the Korea Investment group ― 31.61 percent ― follows only Kakao, the parent company and largest shareholder of KakaoBank, holding a 31.62 percent stake.
Korea Investment's preferential treatment in the IPO underwriting process is somewhat similar to the favorable treatment Samsung Securities enjoyed during Samsung SDS's IPO process back in 2014. Samsung Securities secured an allotment of 18.5 percent of Samsung SDS's share offering, which is exceptionally higher than other co-underwriters which secured only 1.5 percent of the stocks.
Regarding such criticism, Korea Investment said it had no comment on the matter.
Before Kakao Bank's official KOSPI debut slated for Aug. 5, over 1,800 institutional investors from both within and outside the country feverishly participated in the allotment demand survey process. Retail investors' allotment process will take place next Monday and Tuesday, as the competition rate is expected to set a new record high.
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