"Proposal to Increase Individual Allocation of IPO Shares from 20% to 30% and Introduce Equal Distribution"

[Asia Economy Reporter Oh Ju-yeon] Financial authorities are pushing for a reform plan of the subscription system that increases the allocation ratio for general (individual) public offering subscription applicants from the current 20% to up to 30%.

On the 12th, at the Financial Investment Education Center in Yeouido, Seoul, during the public hearing on 'Public Offering Allocation and IPO System Improvement' hosted by the Korea Financial Investment Association, Lee Seok-hoon, Senior Research Fellow at the Korea Capital Market Institute, presented a plan to improve the public offering system based on this content.

In his presentation, Lee Seok-hoon introduced measures including expanding the individual allocation ratio, equal allocation for half of the individual allocation volume, activation of the overallotment option, cornerstone investor system, and providing incentives to institutions that significantly contribute to the pricing of the public offering.

First, a plan to increase the individual allocation ratio, currently at 20%, to a maximum of 30% was discussed. The current regulation allocates 20% of the public offering volume to general investors. High-yield funds and employee stock ownership associations receive 10% and 20% respectively, with the remainder allocated to institutional investors.

According to the Korea Capital Market Institute's proposal presented that day, to expand the allocation volume for general subscribers, the allocation ratio for high-yield funds will be reduced from 10% to 5%, and the individual allocation ratio will be expanded to 25%. Additionally, unsold shares from employee stock ownership association subscriptions will be converted to general subscription shares within a 5% limit, increasing the portion allocated to individual subscribers from the current 20% to a maximum of 30%.

A partial introduction of an equal allocation method for individual subscription shares will also be implemented. This measure considers the criticism that small individual subscribers who cannot mobilize large deposits have limited opportunities to participate in popular public offerings.

Some of the individual subscription shares will continue to be allocated proportionally based on deposits as before, while the remainder can be equally allocated to all subscribers who have paid the minimum subscription deposit.

Other proposals discussed included building a computerized system that allows sharing subscription information among underwriters to prohibit duplicate subscriptions, and activating the 'overallotment option' system.

The overallotment option is a system where the listing underwriter can allocate up to 15% additional public offering shares. This effectively increases the number of public offering shares available to actual investors. Currently, after listing, underwriters must purchase the overallotment shares at a price of at least 90% of the public offering price, but the proposal is to lower this threshold to 80% to activate the system.

Lee said, "Using the overallotment option reduces the risk for underwriters investing in public offering shares, so it is important for investor protection."

This content was produced with the assistance of AI translation services.