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.
Hong Kong was the first jurisdiction to introduce a cornerstone investor system, which allocates a portion of an IPO to investors in advance of the final offer price and requires them to hold the shares for an extended period, according to the Korea Capital Market Institute. The US allows issuers or underwriters to gauge professional institutional investors’ interest in a securities offering before or after filing through its “test-the-waters” regime. In India, anchor investors are an important part of the ecosystem.
In Korea, cornerstone investors’ shares would be released from lockups in stages to avoid a rush of selling when restrictions end. Half of an investor’s allocation would be locked up for six months, 30% for eight months and the remaining 20% for 10 months, according to the FSC.
Underwriters would also be allowed to gauge institutional demand before a company files its registration statement and sets a price range, under non-disclosure agreements, a step the FSC said should make pricing more reasonable.
To qualify, a cornerstone investor would need equity capital or assets under management of at least 20 times the shares it subscribes to in advance. Pre-allocations would be capped at 20% of the institutional tranche on the Kospi, with no single investor taking more than 10%. On the smaller Kosdaq, the limits would be 30% and 20%.
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