South Korea's equity market has experienced a significant downturn in initial public offerings (IPOs) this year, with only 15 new listings and proceeds of around $700 million as of June 3, compared to an average of 80 listings and $8 billion in proceeds annually from 2020 to 2025.
This decline is attributed to governance reform challenges and the high concentration of market capitalization among the five largest Chaebols—Samsung, SK, Hyundai Motor, LG, and HD Hyundai—which together represent about 70% of the market cap.
The country's inheritance tax policy, which imposes a 50% tax on amounts exceeding 3 billion won ($2 million), incentivizes these conglomerates to maintain lower valuations and free floats. In response, South Korea has initiated the 'Corporate value-up initiative' aimed at addressing the 'Korea discount' that sees local shares trading below their international counterparts.
The Korea Exchange has announced plans to prohibit parent-subsidiary listings to protect minority shareholders and is set to delist around 300 companies to streamline the market. While this reduction in IPOs has improved valuations for existing parent companies, it has negatively impacted the fundraising environment for venture capital.
Analysts suggest that the IPO landscape is shifting towards a more selective approach, with expectations that AI infrastructure companies will dominate future listings, driven by the country's strengths in the semiconductor sector. Public funding and industrial support will be crucial for the growth of South Korea's AI industry, as highlighted by recent investments from the National Growth Fund