[Exclusive] Just One KOSPI IPO by July as Overlapping Listings Blocked... Lowest in 25 Years

Only One KOSPI IPO as of July This Year

Lowest in 25 Years since 2001

Retail Shareholder Protection vs. Blocked Corporate Fundraising

The number of companies that have gone public through initial public offerings (IPOs) on the Korea Composite Stock Price Index (KOSPI) this year has hit a 25-year low. Analysts attribute the frozen IPO market to overlapping listing regulations the government implemented to protect general shareholders. While these rules aimed to safeguard retail investors, the contraction of the IPO market has led some to argue that the capital provision function of the stock market—critical to its very existence—has come to a standstill.

Only One KOSPI IPO as of July This Year

According to the Korea Exchange as of July 31, only one company—Kbank—successfully listed on KOSPI through an IPO by July 26. This is just one-fifth the number compared to the five companies that went public during the same period last year. Looking back since 2000, it marks the lowest number since 2001, a span of 25 years. When including new listings on KOSDAQ, there have been only 30 in total, the fewest in six years since the 28 listings during the COVID-19 era in 2020.

With the decline in IPOs, the amount of capital raised through the securities market has also fallen sharply. According to the Financial Supervisory Service, the total value of public offerings—raising funds through IPOs and paid-in capital increases—stood at 2.6631 trillion won as of May. This represents a 30.7% decrease compared to the same period last year.

Experts point to the current administration's overlapping listing regulation as the decisive reason for the IPO drought. Previously, there was widespread criticism in the domestic stock market about lucrative business divisions being spun off and separately listed, which benefited only major shareholders and damaged the value of existing parent company shareholders. In response, the Financial Services Commission, Financial Supervisory Service, Korea Exchange, and other financial authorities began to impose comprehensive regulations on overlapping listings.

On July 7, the financial authorities and the Korea Exchange announced a draft of the "Korea Exchange Rules and Overlapping Listing Guidelines," outlining the details of the ban on overlapping listings. The guidelines, based on a director's fiduciary duty to shareholders under the Commercial Act, impose five key procedural obligations on parent company boards of directors: shareholder impact assessment, shareholder protection plans, verification of shareholder communication and consent, board resolution and notification on the listing, and disclosure. The listing review criteria for special cases at the Korea Exchange have also been significantly strengthened.

The problem is that until these strong new regulations take root in the market, they have created substantial "policy uncertainty" in the IPO sector. Large conglomerates and medium-sized enterprises preparing for the IPOs of their subsidiaries have widely turned cautious, opting to postpone or withdraw their listing plans for fear of violating the stricter rules. Indeed, all affiliate companies that were preparing for listings—including Essex Solutions (parent company: LS Group) and Netmarble Neo (parent company: Netmarble)—have halted their listing procedures.

Even if the prevention of overlapping listings is an inevitable step for the advancement of the capital markets, experts point out that there are insufficient safeguards in place to cushion the impact on companies. Notably, the venture capital (VC) and private equity fund (PEF) sectors—both sources of risk capital that often rely on subsidiary IPOs to recoup investments—have been directly hit.

The IPO Drought Likely to Persist Through the Second Half of the Year

Financial industry insiders predict that this wait-and-see approach will persist in the second half of the year, bringing the total number of annual IPOs to a historic low. Many believe companies will only return to the IPO process after the overlapping listing guidelines and supporting regulations are finalized, resolving market uncertainty.

According to securities industry estimates, the total number of listings for the year will likely remain at 64–68, while the total capital raised through public offerings is projected to be between 3.4 trillion and 3.9 trillion won. This is a drastic reduction compared to the 20 trillion won in 2021 and 16 trillion won in 2022, and about a 60% decrease from the average public offering amount over the past decade.

Nevertheless, Sono International is currently proceeding with its listing, targeting the second half of the year, and companies such as DeokSan Nepcores and DTS are also preparing for IPOs in accordance with the new overlapping listing guidelines. Whether these companies pass the preliminary review and the finalization of the new guidelines clears up market uncertainty is expected to be a key inflection point for market recovery.

Experts argue that excessive regulatory tightening and stricter reviews are intensifying the policy-related uncertainty plaguing the IPO market. Kim Daejong, professor at Sejong University’s School of Business, stated, "The contraction in the IPO market is not just about fewer companies going public, but a signal that the vibrancy of the capital markets as a whole is declining. Recently, regulations aiming to strengthen the protection of general shareholders have been introduced one after another, leading companies to feel increasing uncertainty and costs associated with listing."

Professor Kim added, "Protecting general shareholders is an essential policy, but overregulation can narrow funding channels for innovative companies and ultimately erode the competitiveness of the domestic capital market. Safeguards for shareholder protection should be maintained, but the predictability of regulation needs to be enhanced so that corporate fundraising functions are not overly constrained."

Lee Hyosup, senior research fellow at the Korea Capital Market Institute, said, "Since overlapping listings have been fundamentally prohibited, many unlisted affiliates of large conglomerates, which used to account for a significant share of IPOs, have had their listings put on hold. Also, given the current sluggish KOSDAQ market, companies are delaying IPOs fearing they will not secure satisfactory valuations." He added, "We need to see more concrete exceptions and cases related to the principle ban on overlapping listings. It is important to accumulate cases in which the IPOs of subsidiaries—which contribute to enhancing corporate value and do not undermine the intent of government policy announcements—are actively pursued."

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