Under the cornerstone investor system taking effect this November, institutional investors that receive pre-allocated shares in initial public offerings must hold their volume for up to 10 months. Cornerstone investors will be allocated up to 20% of the IPO shares assigned to general institutional investors in the KOSPI market, and up to 30% in the KOSDAQ market.
The Financial Services Commission (FSC) said on the 30th that it would issue a legislative notice of the "Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act and the Regulations on Issuance and Disclosure of Securities," which specify the eligibility requirements and volume allocation standards for cornerstone investors.
The cornerstone investor system pre-allocates a portion of IPO shares to institutional investors that pledge a lockup of six months or more, and takes effect on November 13 this year. The aim is to increase the proportion of institutional investors holding volume over the medium to long term and to enhance the rationality of IPO price determination.
To participate as a cornerstone investor, an entity must be a professional investor with at least 30 billion won in entrusted assets and must meet the condition of holding equity capital or entrusted assets of at least 20 times the pre-subscription volume. The standard was set on a relative scale so that small and mid-sized institutions can also participate. The lockup period is set at six months for 50% of the allocated volume, eight months for 30%, and 10 months for 20%.
To prevent preferential treatment for affiliates or the shifting of risk, contracts with institutional investors that have a conflict of interest (such as major shareholders and specially related persons) are prohibited, and exchanging direct or indirect benefits on the condition of a cornerstone investor contract is also banned.
