economy
South Korea’s IPO Bust Clouds Equity Markets as Chaebol Structure Restrains Listings
South Korea's IPO activity has lagged that of its regional peers as the structure of the market and governance reforms collide.
TL;DR
- South Korea has seen a significant drop in IPO activity, with only 15 new listings and $700 million raised by June 3, 2024.
- This decline is linked to governance reforms and the prevalence of Chaebols, family-run conglomerates that dominate the market cap.
- South Korea's high inheritance tax incentivizes conglomerates to keep valuations and free float low.
- The 'Corporate value-up initiative' and amendments to the Commercial Act aim to improve corporate governance and minority shareholder protection.
- Parent-subsidiary listings will generally be prohibited to prevent dilution of parent company value.
- The market operator plans to delist about 300 companies to encourage new listings and deter unfair trading practices.
- The IPO slowdown is creating challenges for venture capital fundraising and exits but is evolving the market towards selectivity.
- Future IPOs are expected to be dominated by AI infrastructure companies, particularly in the chip sector.
- Public funding and industrial support are deemed crucial for the growth of South Korea's AI industry.