Expansion of Individual Allocation in IPOs... Criticism as a "Short-term Measure"

[Asia Economy Reporter Oh Ju-yeon] As financial authorities plan to expand individual investors' opportunities to invest in public offerings starting next year, concerns have been raised that this policy is a short-term measure addressing the overheating phenomenon in public offerings.

At the 'Development Direction of the Korean IPO Market' policy symposium held online on the 10th by the Korea Securities Association, Professor Song Gyo-jik of Sungkyunkwan University's Business Administration Department stated, "This is a short-term measure due to the overheating of some public offerings this year," adding, "Even if the allocation ratio for general subscription applicants is increased, it will not resolve the dissatisfaction of applicants regarding certain public offerings."

The financial authorities decided to increase the allocation ratio for general subscription applicants in public offerings from the current 20% to around 25?30% starting next year.

Professor Song pointed out that "Increasing the general subscription allocation ratio to 30% will not alleviate individual investors' dissatisfaction with some public offerings," calling it a short-term measure. He also mentioned the possibility of stock price declines after listing, stating, "This could rather cause losses for individual investors and weaken the public offering market due to the deterioration of underwriters' price discovery functions and allocation failures."

He suggested activating dedicated public offering investment funds, saying, "To encourage more individual investors to participate in the public offering market, one method is to create public offering funds for individual investors and allocate a large portion to these funds."

On the other hand, there were opinions that increasing the allocation of public offering shares is necessary given the active participation of individual investors in the stock market.

Lee Seok-hoon, a senior researcher at the Korea Capital Market Institute who participated as a discussant, explained, "If individual investors increase, there is a risk of investor losses," adding, "If individuals sell public offering shares due to overvaluation and exit the market, the IPO market could become a 'cold market.'"

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