|
|
 Primary
Market |
The Korean primary market consists of three
types of market participants: |
， Issuers who
need capital;
， Investors who supply capital
， Underwriters who distribute stocks to the
investors, and in the case of unsold stocks,
are
committed to purchase a certain portion
of the stocks.
|
|
In the primary market, two methods are mainly
used to attract investors: public offering
and private placement. |
， If a company
offers its shares to over 50 investors under
equivalent terms and conditions, it is
considered a public offering, fulling
applying the Securities and Exchange Act.
|
| Underwriting
|
|
Underwriting involves three organizations:
|
， Management
group
， Underwriting syndicate
， Subscription agent group.
|
|
The management group analyzes and determines
the price of the securities, underwrites any
unsold portion, and stabilizes prices for
newly listed ones. |
|
The underwriting syndicate has the responsibility
of ensuring valid, accurate securities analysis,
while also assessing the overall state of
the market's supply and demand. |
|
The subscription agent group is responsible
for the sale of securities, assuming the risks
involved in buying the issue and then reselling
these shares to the public. The firm commitment
underwriting contract is most commonly used
in Korea. |
| Initial
Public Offering |
|
To go public, a company may sell outstanding
shares or issue new shares. In each case,
a company must provide more than 50 people
with its shares under the same terms and conditions
to be considered a public offering. |
|
To be listed on the KRX, a company is required
to pass listing evaluation and meet listing
requirements. |
|
Any corporation wishing to go public must
first file documentation with the FSC 6 months
prior to going public. |
|
The corporation, to facilitate the issuance
of new shares, must first make a contract
with a securities company to act as a lead
manager in making the public offering. A lead
manager handles book-building, which is a
preliminary survey of how much interest prospective
buyers have in a particular issue. Based on
the results of the book-building, the lead
manager and the issuer negotiate on a price
for the share. |
| Capital
Increase |
|
A corporation after its establishment may
then begin raising funds. |
Capital increase can be achieved through two
methods:
， issuing new shares with consideration
(rights offering)
， issuing new shares without
consideration (bonus offering). |
|
Rights offering is the most common method
used by corporations in Korea. Investors may
make a subscription payment for new shares
which are offered three ways: offering to
existing shareholders; allotment to a third
party; and public offering. |
|
Bonus offering increases the total number
of a corporation's outstanding shares without
any change in the shareholder's equity or
total assets of the issuing companies at the
time of issuance. This type of capital increase
is categorized into two methods: transfer
of reserves and stock dividends. |
|
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