FilingsTodayHow Korean rights offerings work
Updated 2026-10-31
A paid-in capital increase (유상증자) is the Korean term for selling new shares for cash. Listed companies use it to repay debt, fund investment or, in difficult cases, simply to keep operating. Each decision is filed on DART as a major event report titled 유상증자결정, and the main facts are in the first table of that filing.
The first thing to check is who is allowed to buy the new shares, because it decides how the price is set and who carries the dilution.
Three ways to allot new shares
| Method | Korean term | Who buys | Price discount |
|---|---|---|---|
| Shareholder allotment | 주주배정 | Existing shareholders, in proportion to their holdings | Set by the company; in practice usually around 20% to 25% below the market-based reference price |
| Shareholder allotment with public offer of unsubscribed shares | 주주배정 후 실권주 일반공모 | Existing shareholders first, then the public for anything left over | As above |
| General public offering | 일반공모 | Anyone, usually through an underwriter | Up to 30% below the reference price |
| Third-party allotment | 제3자배정 | Named investors, such as a strategic partner, a fund or the largest shareholder | Up to 10% below the reference price |
The discount limits come from the Financial Services Commission's regulation on securities issuance and disclosure (증권의 발행 및 공시 등에 관한 규정). The reference price is based on recent average closing prices, using one-month, one-week and latest-day prices. There are exceptions, for example shares issued to a buyer chosen in a court rehabilitation process.
A third-party allotment does not give existing holders a chance to buy, so it dilutes them directly. A shareholder allotment offers everyone the same deal; holders who pay keep their percentage, and holders who do not pay are diluted.
How the price is fixed in a shareholder allotment
A shareholder allotment takes about two months from the board decision to the listing of the new shares. The filing first shows an expected issue price. The price is then recalculated closer to the record date (the first price) and again shortly before subscription (the second price). The final price is normally the lower of the two, so a falling share price during the process lowers the issue price and raises the number of won the company must raise per share sold. Amended filings marked [기재정정] are common in this period, and each one shows the updated price.
Record date and the ex-rights price
Shareholders on the register on the record date for new share allotment (신주배정기준일) receive the right to subscribe. Korea settles trades two business days after the trade (T+2), so a buyer has to purchase at least two business days before the record date to be on the register. The day after the last such day is the ex-rights date (권리락일).
On the ex-rights date the Korea Exchange lowers the base price of the stock to reflect the cheaper new shares. The calculation is a weighted average:
Ex-rights reference price = (previous close × existing shares + issue price × new shares) ÷ (existing shares + new shares)
The price limit and the daily change shown by brokers are measured from this adjusted price, not from the previous close.
Worked example
A hypothetical company has 10,000,000 shares. The stock closed at ₩10,000 on the day before the ex-rights date. The company is selling 2,000,000 new shares (one new share for every five held) at ₩8,000.
- Market value before: 10,000,000 × ₩10,000 = ₩100B
- Cash raised: 2,000,000 × ₩8,000 = ₩16B
- Ex-rights reference price: (₩100B + ₩16B) ÷ 12,000,000 shares = about ₩9,667
A holder of 1,000 shares receives the right to buy 200 new shares for ₩1.6M. If they pay, they end up with 1,200 shares worth about ₩11.6M at the reference price: the same ₩10M they had plus the ₩1.6M they paid. If they do not pay and the rights expire, they hold 1,000 shares worth about ₩9.67M and have lost about ₩333,000 of value. That is why subscription warrants matter.
Subscription warrants (신주인수권증서)
In a shareholder allotment a listed company must issue subscription warrant certificates (신주인수권증서), and they are listed and traded on the exchange for a short period before subscription. A holder who does not want to pay can sell the rights instead of letting them lapse. In the example above, each right should be worth roughly ₩9,667 − ₩8,000 = about ₩1,667, before trading costs and market moves. Foreign investors should ask their custodian or broker how rights are credited and whether they can be sold, because this varies by account type.
Shares that nobody subscribes for are called unsubscribed shares (실권주). Depending on the structure, they are offered to the public, taken up by the underwriter, or cancelled.
Measuring dilution
This site ranks rights offerings on the dilution page by new shares as a share of existing shares. In the example, 2,000,000 ÷ 10,000,000 = 20%. A 20% issue at a 20% discount is very different from a 5% issue placed with a strategic partner at market price. When reading the filing, also check:
- Use of proceeds (자금조달의 목적): facilities, working capital, debt repayment, or acquiring other securities.
- The largest shareholder's participation: the filing for a shareholder allotment states how many of its allotted shares the largest shareholder plans to take up.
- Lock-ups for third-party buyers: shares placed with named investors are usually deposited and cannot be sold for a period, commonly one year.
- Bonus issue in the same filing: some companies pair a rights offering with a free bonus issue (무상증자), which changes the share count again.
Comparison with the US
True rights offerings are rare among large US companies, which more often sell shares through underwritten offerings or at-the-market programmes and register them with the SEC. In Korea the shareholder allotment is a normal tool even for large companies, and a listed tradable right is part of the standard process. A US company's equity sale is usually announced in an 8-K and a prospectus supplement; the Korean equivalent is the major event report followed by a securities registration statement (증권신고서) for public offers.