South Korea Tightens IPO Rules, Mandates 10-Month Lock-up for Cornerstone Investors

South Korea is introducing new regulations to curb the volatile nature of initial public offerings (IPOs) by mandating longer lock-up periods for cornerstone investors. Under the new rules, these key investors, who are allocated shares before an IPO, will be required to hold their shares for a maximum of 10 months.

Furthermore, the government is tightening the criteria for becoming a cornerstone investor. Only institutions possessing capital or entrusted assets exceeding 20 times the subscription volume will be eligible. This move is intended to ensure that cornerstone investors have a substantial stake and commitment to the companies they support.

The Financial Services Commission (FSC) announced that these changes, aimed at preventing the "brutal history" of IPO public offerings, will take effect in November. The implementation coincides with the introduction of pre-IPO demand forecasts and the cornerstone investor system under the Capital Markets Act enforcement decree.