A bill introducing cornerstone investors (anchor investors) to foster a medium- to long-term investment culture in Korea's initial public offering (IPO) market has passed the National Assembly.
The National Assembly convened a plenary session on the 23rd and approved an amendment to the Financial Investment Services and Capital Markets Act, centered on introducing the cornerstone investor system and permitting pre-demand forecasting.
The cornerstone investor system allocates a portion of shares before listing to institutions that commit to holding them for at least six months during the IPO process. For promising companies, the system offers the benefit of securing quality long-term investors even before listing. The cornerstone investor system has already been adopted and actively used in financial hubs such as Hong Kong, Singapore, and Europe. In Korea, attempts to introduce the system have been made consistently since 2018, but legislative efforts repeatedly failed before finally clearing the National Assembly this time.
The core of the amendment is the introduction of pre-demand forecasting. The current Capital Markets Act restricts the solicitation of subscriptions before the acceptance of a securities registration statement. As a result, underwriters faced potential legal risks when gauging demand — such as desired prices and quantities — by providing corporate information to institutional investors prior to filing the registration statement. With the passage of this amendment, underwriters will be able to assess market demand from the initial stage of setting the indicative IPO price band.
Once pre-demand forecasting is permitted, pre-allocation to institutional investors who commit to a lock-up period of at least six months will also become possible. The Financial Services Commission (FSC) said, "The cornerstone investor system will help build investor confidence in IPOs by securing stable medium- to long-term institutional investors in advance, and will contribute to fostering a healthy IPO culture by mitigating the so-called IPO curse, in which offering prices decline sharply within a short period after listing."
The amendment will take effect six months after promulgation. Since details such as conduct rules for pre-information disclosure, caps on cornerstone investor allocations, and standards for conflict-of-interest prevention systems have been delegated to the enforcement decree, the government plans to design the detailed framework by gathering opinions from institutional and individual investors as well as underwriters.
