Korean flags are being flown on high-rise buildings and businesses in Gangnam-gu, Seoul.
Anne Hermes | Christian Science Monitor | Getty Images
Stock IPO activity in South Korea has plummeted this year as efforts to boost corporate valuations have stalled over governance reforms and large chaebols (family-run conglomerates).
According to LSEG data, there were 15 new listings in South Korea in the year to June 3, with total proceeds of about $700 million. By contrast, the data shows that from 2020 to 2025, there were an average of 80 new listings per year, worth about $8 billion. New listings and profits in Malaysia are almost double those in South Korea.
In contrast, the Kospi is the world’s best-performing major index, more than doubling in value in the year to Monday.
Polka Mishra, a partner at Javelin Wealth Management in Singapore, said the chaebols that were once at the heart of South Korea’s industrial development are now “more of a hindrance than a help in creating new champions of independent listing.” South Korea imposes a 50% inheritance tax on amounts above 3 billion won ($2 million), giving conglomerates an incentive to keep valuations and free float low, he said.
The problem: In 2024, South Korea launched a “Corporate Value Improvement Initiative” to end the so-called “Korean discount,” where stocks trade at lower levels than their overseas peers. The country has amended its commercial code three times to improve minority shareholder protection and corporate governance.
The five largest conglomerates – Samsung, SK, Hyundai Motor, LG and HD Hyundai – accounted for about 70% of South Korea’s stock market capitalization as of Monday, according to data from the Korea Exchange.
Korea Exchange CEO Jeong Eun-bo told CNBC on June 11 that parent-subsidiary listings, which refer to divisions pursuing their own listings, are “in principle prohibited.” A parent company listing could be seen as diluting the value of the parent company at the expense of minority shareholders, while allowing the controlling family to retain control of the newly listed subsidiary.
According to the Financial Services Commission, cross-shareholdings between listed parent companies and their subsidiaries accounted for about 11% of South Korea’s market capitalization as of last year, compared to about 4% in Japan and 3% in Taiwan.
South Korean market operators plan to delist about 300 companies by next year and direct funds to new companies, said Chung of the Korea Exchange.
Chung said the Korea Exchange promptly removes bankrupt companies from the market and encourages new listings. Ultimately, the aim is to “block out unfair trade practices and expand access for new businesses seeking to go public.”
Lee Hyo-seop, a senior researcher at the Korea Capital Market Research Institute, a Seoul-based think tank, said the decline in numbers has increased the valuation of parent companies, while the economic slowdown has worsened the environment for venture capital funds to raise funds and exit.
Joong-kik Park, Korea IPO leader at EY, said the slowdown in IPOs suggests the market is “evolving into a more selective and quality-focused market, with capital increasingly concentrated in narrower sectors and issuers.”
According to Park, South Korea already has a “large number” of listed companies, amounting to about 2,700 companies. Although South Korea’s stock market capitalization is only a fraction of that of the United States, this is equivalent to about half that of the United States.
Lee of the Korea Capital Market Research Institute said restrictions on IPO activity in South Korea are a double-edged sword for the entire capital market.
Still, Korea Exchange’s Chung said the decline in IPOs reflects a transition period in the country’s efforts to boost corporate valuations.
“If the government issues clearer guidelines on parent-child listings, companies will be more willing to proceed with the listing process,” he said.
AI IPO outlook
Analysts expect AI infrastructure companies to make up a large portion of South Korea’s IPO pipeline going forward, reflecting South Korea’s strength in the chip sector led by Samsung Electronics and SK Hynix.
“Semiconductor and AI data centers require huge capital expenditures and long-term capital deployment, meaning there are limits to what private capital can do alone,” Kang Jin-hyuk, a senior analyst at Shinhan Securities, said in a May 22 report.
“Ultimately, the role of public funds and industrial financial support will become even more important for the growth of South Korea’s AI industry,” Kang said. He cited the example of how the state-led National Growth Fund invested about $130 million each in AI chip startups Rebellions and FuriosaAI.
-CNBC’s Ying Shan Lee contributed to this article.
