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KRX chief vows investor protection over Kakao stock options row

Sohn suggests lockup period on execs selling shares following IPOs

Sohn Byung-doo, chairman and CEO of the Korea Exchange, speaks during a press conference at the KRX in Seoul. (KRX)
Sohn Byung-doo, chairman and CEO of the Korea Exchange, speaks during a press conference at the KRX in Seoul. (KRX)
The Korea Exchange will work to bring about a transparent market that affords retail investors better protection from market abusers and helps companies find the support they need to go public and compete with global peers, the bourse operator’s chief said Monday.

“We see rebuilding market trust as key to that mission. This is an unprecedented time in that we have so much attention drawn to us,” Chairman and CEO Sohn Byung-doo said at a press conference, referring to recent rows involving Kakao Pay and LG Energy Solution.

The CEO and other executives at Kakao Pay stepped down last week amid criticism that their exercising of stock options in December last year, a month after the firm was listed, brought an unwarranted stock dip. The company now bans a managerial sell-off up to two years following an initial public offering.

Retail investors holding shares in LG Chem -- which wholly owns LG Energy Solution that is going public Thursday in what many expect to be a record listing after a contentious spinoff -- have cried foul over the “unfair corporate practice” gone unregulated despite the share dilution that followed.

Sohn suggested lockup periods on executives looking to offload shares following an IPO to prevent a similar stock options row, while stressing that he will make it mandatory to listen to retail investors’ complaints when processing spinoff IPOs.

“The so-called ‘Korea discount’ is still here, has been and will be, to some degree. But we will try to phase that out, step by step,” Sohn said, referring to the practice of undervaluing Korean shares in comparison to global peers because of market volatility.

Once, the instability had more to do with North Korea, the belligerent neighbor that has regularly used shows of force to make threats against the South. But it is now more about how the local stock market can police itself when market-rigging scandals derail investor confidence, according to Sohn.

Meanwhile, Sohn said that he will make it easier for companies to attract investments on the junior, tech-heavy Kosdaq, saying the exchange will link the highest-performing public companies to more investment opportunities by grouping them separately into the “Kosdaq Global Segment.”

The change will ensure the stock market rides on the upward momentum seen in the last year, when the key benchmark Kospi and junior Kosdaq reached record highs on upbeat corporate earnings and retail demand. The exchange also saw record-high IPOs.

But the upward momentum is losing traction as worries over the sooner-than-expected rate hike in the US is seen leading the Kospi to dip below 2,800 for a second day since Monday, a first since Dec. 23, 2020, when it closed at 2,759 points.

The Kospi tumbled to 2720.39 points Tuesday, down 71.61 points or 2.56 percent from Monday as foreigners and institutions extended their sell-offs amounting to 469.8 billion won ($392.15 million) and 171.3 billion won, respectively. The Kosdaq slid to a 10-month low at 889.44.

Analysts said fears over reduced liquidity, combined with a temporary cash drain for LG Energy Solution’s IPO two days later, were weighing on the market. Strong corporate earnings will put the trajectory back to an uptrend, they added.

By Choi Si-young (siyoungchoi@heraldcorp.com)
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