This article was published on April 30, 2026, at 16:40 on Signal, the capital markets compass.
While some companies pursuing initial public offerings (IPOs) have recently discussed allocating shares to parent-company shareholders, the idea is unlikely to materialize due to inadequate IT infrastructure. Shareholder information scattered across multiple brokerages must be gathered, cross-checked, and consolidated to grant equal IPO subscription rights, but the securities industry currently lacks such a system. The industry views in-kind dividends as an alternative to IPO share allocation.
According to investment banking (IB) sources on the 30th, a dual-listed company seeking to allocate IPO shares equally to its parent's shareholders would have to manually collect, cross-check, consolidate, and allocate shareholder information scattered across multiple brokerages. The Korea Securities Depository, which aggregates securities data, has not built a separate system for IPO allocation because its main role is the custody of issued and circulating shares. "Building such a system requires prior consent from each shareholder for the provision of personal information, and the required time and cost are substantial," a securities industry official said. "Legal grounds would also likely be needed."
Essex Solutions, which recently pursued such an allocation, reportedly considered a near-manual approach due to these problems. During its IPO process, Essex Solutions sought to carry out a separate third-party allotment capital increase for shareholders of its controlling company LS, granting subscription rights distinct from the IPO. Since automatically consolidating shareholder information was impossible, the company considered a method in which each shareholder would deposit their shares into an account at the brokerage managing the rights offering, after which the company itself would cross-check the information and allocate rights. Though a stopgap born of system inadequacies, this approach raised concerns about loss of rights for shareholders who did not transfer their shares and the emergence of forfeited shares from under-subscription.
The securities industry views in-kind dividends as an alternative to IPO share allocation. Because allocating IPO shares under the current framework requires manual work prone to errors, distributing subsidiary shares to parent-company shareholders after the IPO is seen as more realistic. A Kosdaq-listed company currently preparing a subsidiary IPO is reviewing options other than IPO share allocation — such as in-kind dividends — as a shareholder return measure. It had once discussed ways to allocate IPO shares but concluded that the current IT system makes this difficult. In 2023, Kosdaq-listed Philoptics distributed shares of its subsidiary PNE Solution (Phil Energy) as an in-kind dividend to its shareholders during the subsidiary's IPO.
"Under the Personal Information Protection Act and the current securities IT framework, IPO share allocation is effectively impossible," an IB industry official said. "Distributing subsidiary shares as an in-kind dividend with the consent of the parent's minority shareholders is the more feasible option."
