Pipe dream for IPO jackpots draw Korean 30s, 40s men into OTC stocks

2021.05.03 14:11:56 | 2021.05.03 14:12:23

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Thirty- and forty-something Korean men are engrossed in over-the-counter (OTC) stock trade in dream of IPO jackpots like Coupang that went public on the New York Stock Exchange in March.

According to Korea Financial Investment Association on Sunday, daily turnover of Korea’s OTC market dubbed K-OTC so far this year averaged 6.7 billion, up 31.8 percent from 5.1 billion won last year. K-OTC, established in 2014, is operated by the Korea Financial Investment Association as an official OTC trading market.

Mom-and-pop investors are flocking to private OTC platforms such as Seoul Exchange and Stockplus. The number of subscribers to Stockplus launched in 2019 surpassed 500,000 recently and the number of monthly active users with Seoul Exchange that began service in December last year jumped from 10,000 to 150,000 last month.

Nearly 8 out of 10 Seoul Exchange subscribers were men. Data showed that 75 percent of subscribers in their 20s and 30s were male investors, 74.29 percent from those in their 40s, 73.08 percent in 50s, and 85.71 percent in over 60s.

Investors in their 30s and 40s were most actively involved in OTC trade.

According to Seoul Exchange, nearly 60 percent of its users are in their 30s and 40s – 24 percent in 30s and 35 percent in 40s.

More than half of Stockplus service users are also in their thirty- or forty-something – 23.96 percent in 30s and 28 percent in 40s – as of February.

Younger investors who are behind the crypto fad are also turning to OTC.

According to Stockplus, the number of monthly active users in their 20s increased by more than 15 times from 1,896 last year to 29,608 in February, significantly outpacing overall surge from 15,000 to 134,000 users.

Investors in their 20s accounted for 22.1 percent of the total users as of end of February, nearly doubling from 12.6 percent last year.

Market analysts noted that mom-and-pop investors in their 30s and 40s are keen on OTC trade as they are able to take one step ahead of others by picking an unlisted stock in anticipation of an IPO.

The retail fever in the OTC market has led to a rise in the price of unlisted stocks.

According to Seoul Exchange, Kakao Bank shares were trading at over 100,000 won in the OTC market, up from 70,000 won early this year. Kurly shares were also up from 27,000 to over 80,000 won.

Stocks traded in private OTC exchange are subject to higher tax as to normal stock trade or those through K-OTC, which claim 0.23 percent of sale price as stock exchange tax. Capital gain tax is waived for investors in small- and mid-size enterprises and ventures.

Investors in private platforms, meanwhile, are levied 0.43 percent for trade and 10 percent for capital gain in shares of small- and mid-size enterprises and 20 percent of other firms.

Experts warned that individual investors should be prudent when investing in shares of non-listed companies as they are not subject to disclosures which restrict information. The shares could also be over-valued.

An unnamed official from the financial investment industry said that retailers that buy shares of a non-listed company with IPO expectation can face difficulty in re-selling them if they do not list as planned.

By Moon Ji-woong, Shin Hwa, and Lee Eun-joo

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