Domestic Funds Disguised as Foreign Investors Dodge South Korea IPO Commitments

According to financial industry sources on July 21, South Korean domestic institutional investors are facing disadvantages in initial public offerings as overseas institutions classified as foreign investors receive larger allocations while avoiding mandatory holding commitments, despite some being funded by domestic capital.

In the HLG Genomics IPO scheduled for listing on KOSDAQ on July 24, foreign institutional investors were allocated 230,850 shares without any commitment period, while domestic investors' non-commitment ratios ranged from 36.14% to 56.53% across different categories. Domestic funds are establishing overseas shell funds to appear as foreign investors, enabling them to bypass regulatory restrictions and gain favorable allocation treatment. The practice generates commission revenue for securities firms through repeated derivative transactions without actual financial losses, contributing to preferential IPO allocation for these disguised funds.