 |
Korea Exchange headquarters. (Photo = Korea Exchange) |
[Alpha Biz= Kim Jisun] The Korea Exchange (KRX) has strengthened its IPO review procedures to prevent a recurrence of the so-called “HYBE incident,” by requiring more thorough scrutiny of shareholder agreements.
According to the KRX on July 16, the exchange revised its due diligence checklist submitted by underwriters at the time of preliminary IPO review applications at the end of last year. The revised checklist now includes items specifically aimed at reviewing shareholder agreements.
Under the new rules, if a shareholder agreement exists, the checklist mandates a review of whether the agreement:
Undermines the company’s management independence,
Poses risks to minority shareholder protection,
Raises concerns regarding secondary offerings of shares by institutional investors, and
Involves de facto share transfers by major shareholders under the guise of shareholder contracts.
Previously, submission of shareholder agreements was not mandatory during the IPO review process. However, following the controversy surrounding HYBE Chairman Bang Si-hyuk’s alleged secret contract, the KRX appears to have introduced the changes to better protect minority shareholders.
Chairman Bang is accused of misleading early shareholders by stating there were no IPO plans in 2020, just before HYBE went public. Based on his assurance, investors sold their shares to a private equity fund (PEF). At the same time, HYBE was reportedly taking concrete steps to prepare for an IPO, including designating an external auditor, a required step in the IPO process. Investigations by the Financial Supervisory Service (FSS) indicate that Bang entered into a private agreement with the PEF—founded by a close associate—to share 30% of IPO profits. After HYBE’s listing, Bang allegedly received about KRW 400 billion through this arrangement.
This private deal was not disclosed during KRX’s IPO review or in the IPO registration statement, which is legally required to include material shareholder agreements. The incident sparked calls for regulatory reform, prompting the KRX to amend its review framework.
A KRX official stated, “In response to the HYBE IPO controversy, the submission of shareholder agreements has been made mandatory to strengthen investor protection.”
Meanwhile, the Financial Services Commission (FSC) is expected to finalize its disciplinary measures regarding Bang’s alleged unfair trading practices at its regular meeting today.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
