Yahoo Finance Korean Block Trades Gather Pace Before Disclosure Rules Tighten
(Bloomberg) -- South Korea is expected to see an increase in block equity sales as holders seek to raise funds before a change in rules requires more disclosures.
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Since 2022, authorities have moved to strengthen regulations involving Seoul-listed share offerings as part of measures aimed at preventing insiders from profiting on privileged information. A revised framework for block trading will take effect on July 24.
The imminent new rule accompanies a much-touted “Corporate Value-up Program,” announced earlier this year that aims to improve company share valuations through better management practices. Additional share sales in South Korea have surged to $5.4 billion since the start of 2024; that’s more than 20 times the tally for the same period last year.
“The number of block deals has significantly increased recently compared to the usual level. This trend is expected to intensify as we approach the end of July,” said Sanghyun Park, an analyst at Clepsydra Capital who published on platform Smartkarma. Companies with a high ratio of major shareholder ownership, “are expected to be most impacted due to their strong connection with the block market.”
Executives and major shareholders planning to offload stakes — or buy large holdings — will need to disclose details such as the expected price and number of shares changing hands at least 30 days before transactions. The rules, also covering convertible bond offerings, apply to holders of stakes of at least 10%.
According to the country’s Financial Services Commission, investors such as pension funds will be exempt from the requirements as their internal compliance policies are considered to be stringent, reducing the prospect of private information being used for insider trading.
The new rules are expected to improve transparency, prevent illegal trading and reduce market volatility, the FSC said in a statement in February.
So far this year, block trade deals have been mostly generated by private equity sponsors and majority shareholders reducing their stakes, according to Kyungin Lee, the head of Korea global banking at UBS AG.
“We expect continued solid interest from global investors into South Korea, with strong appetite for blocks and placements and a potentially strong IPO pipeline for the second half of 2024,” he added.
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