Financial authorities are tightening their review of securities registration statements for capital increases, leading to a shift in the dynamics of the rights offering market. As requests for corrections have become more frequent, causing delays in deal timelines or even withdrawals of capital increases, large securities firms are increasingly selective in taking on these deals based on profitability and risk assessments. In contrast, smaller securities firms are seeing a rise in their participation in underwriting and subscription activities, particularly among KOSDAQ companies, shifting the market's focus from large firms to smaller ones.
According to data from the Financial Supervisory Service, there were 33 initial securities registration statements related to capital increases submitted by KOSDAQ companies from January 1 to August 25 this year. Companies must submit a securities registration statement (equity securities) when pursuing a capital increase, detailing the type and scale of the securities to be offered.
Quarterly data shows an expanding role for smaller securities firms in the rights offering market. In the first quarter (January to March), large securities firms led three capital increases, while smaller firms managed two, giving a slight edge to the larger firms. However, in the second quarter (April to June), large firms handled nine cases compared to 13 for smaller firms, indicating a narrowing gap. By the third quarter (July 1 to August 25), large firms had only one underwriting case, while smaller firms recorded five, widening the gap significantly.
This trend is attributed to the government's focus on enhancing shareholder value, which has made the review process for securities registration statements more stringent. As the review process has become more rigorous, the time and personnel required for drafting and responding to corrections have increased, while profitability has decreased, prompting large securities firms to selectively take on capital increase deals. Industry experts note that this has opened up new business opportunities for smaller securities firms.
Notably, since July, SK Securities has led four underwriting cases based on the securities registration statements disclosed. SK Securities appears to be actively pursuing capital increase underwriting as one of its main business areas. Analysts suggest that the tightening regulations in the rights offering market pose a burden for large firms while creating new opportunities for smaller firms.
Industry observers believe this trend may continue for the foreseeable future.
An industry insider stated, “As the review criteria related to shareholder rights protection have become stricter than in the past, there is a growing expectation to provide more specific justifications for the purpose of capital increases and the use of funds. Even after submitting a securities registration statement, repeated correction requests or delays in timelines can occur, leading large firms to be more selective about taking on high-risk deals.”
* This article has been translated by AI.
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