Equalized allocation of public offering stocks, loopholes… Financial authorities belatedly trimmed

Side effects are rising on the surface in the IPO market due to the equally allocated public offering stocks that have been implemented since this year. Although the participation of small subscribers increased according to the purpose of the implementation of the system, cases of overlapping subscriptions using institutional loopholes are continuing. It is expected that the construction of a system related to the prohibition of duplicate subscriptions, which remained in a stagnant state as the financial authorities belatedly improved the system, is expected to rise rapidly.

According to the financial investment industry on the 11th, the final competition rate for general subscription of SK Bioscience, which took place on the 9th to 10th, was 335.36:1. The subscription margin was 63,619.8 billion won, a new record for the first place in history. Last year, it easily surpassed the records of Kakao Games (58,554.3 billion won) and Big Hit Entertainment (58,423.7 billion won).

The reason why SK Bioscience’s subscription to public offering stocks was concentrated is that it is the first big fish to be applied with a double subscription.

In November of last year, the financial authorities announced plans to expand general subscription to public offering stocks, including an equal distribution method. This is a countermeasure in response to complaints that the opportunities for small subscribers will be limited amid the craze for public offering stocks such as SK Biopharm, Kakao Games, and Big Hit Entertainment.

Equal allocation is a method in which 50% or more of the general subscription volume is divided by the number of applications and the amount is distributed to all subscribers. The rest will be allocated in a proportional manner to the current subscription margin standard. In addition, it was decided to ban multiple subscriptions through multiple securities companies in IPOs with multiple host companies.

However, due to the delay in the preparation of the Enforcement Decree of the Capital Market Act, it could not be applied to the general public offering stock subscription of SK Bioscience, which ended the day before. About 2.4 million accounts participated through a total of six securities companies, including multiple subscriptions through’account splitting’. There was a situation in which the number of subscription accounts was greater than the amount allocated to public offering stocks, and subscribers who received less than one week appeared one after another.

The problem of such an equal allocation system was detected from the beginning of its implementation. In the case of a public offering that enforced equal distribution, the number of subscriptions increased faster than the margin. As cases of creating accounts and subscriptions in the name of not only family members but also relatives have arisen, criticism has been steadily raised that it does not match the original purpose of the introduction.

In the market, concerns were raised that account splitting would continue for the time being until a system that prohibits duplicate subscriptions is established.

Accordingly, the financial authorities are planning to restrict multiple subscriptions through multiple securities companies from the public offering stock subscription as early as the end of May.

On the 11th, the Financial Services Commission announced that the revision of the Enforcement Decree of the Capital Markets Act will be announced by the 20th of next month. After that, it aims to be implemented on May 20 after regulatory review and legal system review.

First of all, an institutional basis for restricting multiple subscriptions to public offering stocks is prepared. When securities firms allocate public offering stocks, the Korea Securities Finance System is used to check whether investors have duplicated subscriptions, and those who have confirmed duplicate subscriptions will not be assigned duplicated offerings. Only the first subscription received is recognized as valid.

The process of allocating public offering stocks to employee stock ownership is also flexible. Currently, at least 20% of the public offerings are allocated to the employee stock ownership association upon IPO in the securities market. However, in the amendment, if the union wishes to allocate less than 20% in advance, an exception to the mandatory allocation is granted for the unfulfillment.

Meanwhile, as the number of subscription accounts rapidly increases, interest in IPO will continue in the future. It is reported that companies such as SK IET, LG Energy Solutions, Kakao Bank, Kakao Pay, and Krafton are preparing to be listed. Moreover, there are concerns that if the system improvement work, such as the prohibition of duplicate subscriptions, is postponed until the second half of the year, another account split will occur.