S.Korea to ban execs' post-IPO share sale for certain period

South Korea will introduce an IPO lock-up period for company executives and their top shareholders to ban them from selling the company shares shortly after their stock market debut, the country's top financial regulator said on Tuesday. 

The Financial Services Commission (FSC) is revising the relevant laws to make it mandatory for the executives, including CEO, and their largest shareholders to hold their company shares for at least six months after exercising stock options, on the back of their initial public offering.

The regulatory move comes after Kakao Pay Corp.'s CEO Alex Young-joon Ryu exercised all his stock options on the mobile payment app after its stock market debut in November of last year and unloaded them the following month. He netted $37 million in proceeds, selling the stock at 40 times higher than the exercise price.

Seven other executives of Kakao Pay simultaneously dumped the shares they received in stock option programs in after-hours trade.

The stock sale met with strong backlash and led Ryu to resign from the position as a nominee for new co-CEO of its parent company Kakao Corp., South Korea's top mobile messenger app. 

The share price of Kakao Pay plunged to as low as 117,000 won in the first week of this month, less than half of its all-time high of 248,500 touched in late November.

So far there has been no IPO lock-up period applied to CEOs and other senior company executives, nor restrictions on their disposal of shares granted in stock option plans. Only institutional investors are required to hold post-IPO stock for a certain period as a condition to apply for IPO shares.

"The revised regulations on IPO stocks will be immediately effective after passing through our two sub-commissions next month, including the securities and futures markets commission," the FSC said in a statement.

Depending on the company's situation, their mandatory holding period can be extended to one year for CEOs and up to two and a half years for the largest shareholders. 

Write to Sul-Gi Lee at surugi@hankyung.com
Yeonhee Kim edited this article