South Korea’s financial authority is working to place more liability on underwriters to prevent heavy sways after initial public offerings (IPOs).
According to multiple sources from the financial authority on Sunday, the Financial Services Commission plans to announce measures to improve the country’s overall IPO system as early as this month. The move follows crashes in the blockbuster IPOs like SK Biopharmaceuticals and Kakao Games.
Six out of 10 debutants on the Korean stock markets over the last two months trade under the IPO prices.
BBC Co., a manufacturer of daily necessities such as brushes for toothbrush that went public on Sept. 21 saw its share price fall 30.5 percent to 21,350 won ($18.6) on Oct. 8 from IPO of 30,700 won.
The FSC is mulling to have IPO underwriters to keep watch on stock movements for a month after listing.
It can allow greenshoe option – or an over-allotment option – to ease IPO market fluctuation. Greenshoe option is an underwriting agreement for stock stabilization. The option can work two ways: the underwriter buys extra stock from the issuer if the stock surges after IPO to increase supply or buy back the shares from the market if the price falls.
Kakao Games fell 15 percent during Monday, the first day of lift in the one-month institutional lockup on 4.36 million shares, or 38.6 percent of IPOs allocated to institutions. Its losses narrowed to 7.3 percent to 49,150 won. Kakao Games with IPO at 24,000 won debuted on Sept. 10.
By Kim Jung-beom and Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]