Retail share in South Korean initial public offerings (IPO) will go up to maximum 30 percent from current 20 percent as financial authorities indulged stock fever of small investors to sustain the bullish market mood.
According to measures unveiled by the Financial Services Commission, Financial Supervisory Service, and Korea Financial Investment Association on Wednesday, up to 5 percent from undersubscribed share for employees and half from the 10 percent share for high-yield funds would go to retailers starting with the IPO candidates from next month.
Employees are first offered to subscribe to 20 percent of the IPOs. Any left share went to institutions. High-yield funds which invest in below-investment grade or unlisted stocks and bonds that used be allocated with 10 percent in IPOs will now get 5 percent to surrender the other half to mom-and-pop investors.
The changes would up retail subscription share to 30 percent in IPOs.
Subscription method also would change. Competitive bidding share would be halved and the other half will have the equal opportunity to win shares on minimum deposit.
The current proportional method that allocates offerings differently based on subscription deposits has been blamed for a slimmer chance for retail investors of winning bids in a popular IPO. An individual was offered only two shares in Kakao Games despite depositing 100 million won ($90,043). Individuals however cannot bid through multiple brokers.
The move however raises concerns over heightened retail stock frenzy with borrowed money and losses through reckless investment.
By Jin Young-tae and Lee Eun-joo
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