South Korea’s top financial regulator will introduce a system for cornerstone investors in initial public offerings to curb sharp price drops after listings.
The Financial Services Commission said institutions that commit to lockups of at least six months will be allowed share allocation in advance under the new system, which got government approval Tuesday. The rules take effect Nov. 13 alongside amendments to the capital markets law.
“Lining up stable, longer-term institutional buyers before a deal is priced should bolster investor confidence in IPOs and ease the so-called ‘IPO price’ problem, in which shares tumble as holders rush to sell right after listing,” the FSC said in a statement on Tuesday.
Korea’s notoriously volatile stock market has ensnared some of the country’s biggest recent debuts, at times with wide-ranging implications. For example, the 32% plunge of data center infrastructure company Elice Inc.’s shares on their first day became a signal for the global neocloud business. IPOs in Korea have largely disappointed investors this year, with the shares of companies that listed in 2026 down a weighted-average 32%, far behind the Kospi’s gain of 38%.
Sentiment is also weighed down by South Korea’s push for the tighter scrutiny of debuts, including so-called “duplicate listings,” in which a company owned by a publicly traded parent lists its shares separately. Critics say such deals can hurt the parent’s existing shareholders by allowing a subsidiary’s value to be unlocked on its own. SK Hynix Inc. scrapped plans for a potential $10 billion US listing of its Solidigm unit after regulators and shareholders objected that it could dilute minority investors.