South Korea’s financial watchdog has expanded an inspection of Mirae Asset Securities Co. to examine the brokerage’s failure to secure an allocation of SpaceX shares in the company’s initial public offering, according to people familiar with the matter.
South Korea’s financial watchdog has expanded an inspection of Mirae Asset Securities Co. to examine the brokerage’s failure to secure an allocation of SpaceX shares in the company’s initial public offering, according to people familiar with the matter.
Mirae Asset, one of the IPO’s underwriters, had offered access to the stock to select investors. But it ultimately received no shares. The Financial Supervisory Service had already begun inspecting the brokerage last week to determine whether investors who signed up for the SpaceX shares met eligibility requirements for registered professional investors, the people said, asking not to be identified because the matter is not public.
As in most Asian markets, retail investors in South Korea were shut out of the blockbuster listing of SpaceX, formally known as Space Exploration Technologies Corp. Instead, Mirae offered the shares in the form of a private placement to its clients who are registered as professionals, rather than as retail investors. The watchdog widened the scope of the inspection after Mirae failed to receive any allocation of SpaceX shares in the IPO despite accepting deposits from investors, the people said.
Demand for the offering was intense. The first $300 million tranche of Mirae’s placement sold out in one minute, with a minimum investment of $100,000 and maximum cap of $3 million per investor, according to Yonhap Infomax. The brokerage had planned to open subscriptions for a second $200 million tranche on June 8, the report said. Mirae Asset Securities declined to comment.
The company’s shares dropped 1.3% in Seoul on Monday, while the benchmark Kospi index rose 5.2%. The Korea Times reported on Sunday that regulators were planning to examine the circumstances surrounding Mirae Asset’s failure to secure an allocation of SpaceX shares. The failed allocation also disrupted plans by some local asset managers to add SpaceX shares through the offering.
Korea Investment Management Co. said it purchased SpaceX shares after the stock began trading Friday and added them to its ACE US Space Tech Active exchange-traded fund. The fund finished 11% lower on Monday, after rising 10% on Friday. SpaceX accounts for about 26% of the ETF, which has 312 billion won in assets, according to the fund’s website.
“We had promised to provide differentiated value to our investors through participation in the SpaceX IPO but we ultimately failed to receive any allocation of IPO shares,” Korea Investment said on its website on Saturday. “We fully recognize the disappointment this has caused and take this responsibility very seriously. ” Korea Investment said it had launched marketing and advertising activities after it was informed by Mirae that shares were expected to be allocated.
It was notified early Saturday that the lead global underwriter of SpaceX IPO decided to allocate no shares to the entire Korean underwriting group due to unusually strong demand from global institutional investors.
“Even considering the inherent uncertainty of the US IPO market, it was clearly our mistake to create excessive expectations and conduct marketing activities before the allocation has been finalized,” it said. SpaceX shares opened at $150 on Friday, above the IPO price of $135. The stock rallied more than 30% to an intraday high before paring gains to close up 19% at $160.95.
Under South Korea’s capital markets act, an offering is generally considered private if subscription solicitations are made to fewer than 50 investors. For 50 individual investors or more, which is considered public offering, issuers must submit a securities registration statement to financial authorities, which typically becomes effective 15 days after filing.
If an offering is made to qualified professional investors only, it can be exempted from rules that regulate public offering, such as the submission of the statement, even if it’s solicited to 50 or more investors.
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