This article was published on the 9th at 2:50 p.m. on Signal, the capital markets compass service.
With dual listings now banned in principle from this month, subsidiaries preparing to go public are mounting an all-out effort to devise measures protecting the rights of their parent companies' minority shareholders. The move is read as an attempt to ease uncertainty over dual listings by strengthening advance-preparation procedures, so that companies can secure parent-shareholder consent as Duksan Neolux and DTS did when granted exceptional approval for dual listing.
According to investment banking industry sources on the 9th, Company A, an information technology firm pursuing a KOSDAQ listing under the technology special-listing track, is preparing to hold pre-consultations with the Korea Exchange this month, ahead of filing its listing review request. Its underwriter is Daishin Securities, and because its parent is a KOSDAQ-listed company, it falls within the scope of dual-listing regulation. An official in the initial public offering industry said, "Since the first case of an exceptional dual-listing approval emerged, every brokerage is in contact with the exchange to list at least one company with a dual-listing issue," adding, "During the pre-consultation process, we will conduct internal review and prioritize measures to protect parent-company shareholders above all."
Morpheans, a subsidiary of KOSDAQ-listed Kisan Telecom, aims to file its preliminary review request in November this year. Morpheans, which joined the group through a merger and acquisition in 1997, has decided, in discussions with its underwriter Hana Securities, to prepare measures protecting parent-company shareholders. CoAsia Semi, a subsidiary of the CoAsia Group, has begun selecting an underwriter, sending requests for proposals (RFPs) to brokerages last month. Affiliates including Miko Ceramics, Battery Solutions, Mobigen and GF Fermentech are also weighing whether to revive their listing plans.
The successive moves by subsidiaries to prepare for listings are tied to the emergence of the first case in which a dual listing was exceptionally permitted. With Duksan Neolux and DTS, which secured parent-shareholder consent, having cleared the Korea Exchange review, the reasoning is that preparing in a similar manner can reduce dual-listing uncertainty. An investment banking industry official said, "Mobius and CMDL, which recently failed to devise measures to protect parent-company shareholders, have moved toward withdrawal," adding, "Compared with early this year, a certain amount of review data has accumulated, and the mood is that the predictability of dual listings has improved."
Still, some observers note that, apart from the reduced dual-listing uncertainty, the burden on brokerages could grow. Brokerages must devote considerable time and money to devising measures to protect parent-company shareholders and to responding to the exchange's toughened review, yet the fees they receive are not large. The underwriting fee (3.5%) and performance fee (0.1%) that Duksan Neolux promised its underwriter Daishin Securities are also at typical levels.
