This article was published on April 27, 2025, at 11:42 a.m. on the ChosunBiz MoneyMove site.
The underwriting commission rate for corporations valued in trillions has dropped to 0.6%. After breaking the 1% barrier, it had stabilized around 0.8% for a while, but recently that has also been broken.
It is pointed out that large corporations in the trillions require even lower commissions, and securities firms aiming to expand market share have no choice but to accept this, leading to a rapid decrease in commission rates.
According to the investment banking (IB) industry on the 27th, DN Solutions, considered the biggest player in this year’s initial public offering (IPO) market, decided to pay underwriters a commission of 0.6%. Consequently, the lead underwriters, Mirae Asset Securities, Samsung Securities, and UBS Securities, will each receive 1.778 billion won, while Korea Investment & Securities and Merrill Lynch will each receive 752 million won. They noted that although an additional commission of 0.4% will be granted based on public offering success, this should not be expected, as the decision often rests solely with the company.
Market participants are scoffing at this, saying, "It was originally salty, but it's become too salty." Typically, according to the public offering amount, Kospi-listed companies pay 1% and Kosdaq-listed companies 3–5% in commissions to the underwriters. The larger the public offering, the lower the commission rate is set, and for companies valued in trillions, it is often set below 1%.
Corporations that have pursued or are pursuing public listings this year in the securities market have mostly proposed at least a 0.8% commission rate. LG CNS, which had a market cap slightly larger than DN Solutions at nearly 6 trillion won, also proposed a commission of 0.8%. DN Solutions has not yet finalized its public offering price, and if it is lower than the expectations, the portion received by the underwriters will decrease accordingly.
D'Alba Global, which aims for a public listing on the securities market on May 22, is also one of the companies embroiled in low commission controversies. D'Alba Global promised a commission of 0.8%, but even if it receives all performance commissions, the amount received by the lead underwriter, Mirae Asset Securities, will be less than 700 million won.
An industry insider lamented, "With dozens of professionals deployed for over a year to handle underwriting tasks, at least 1 billion won must be received just to cover labor costs."
In fact, the acceptance of low commission engagements is not new. Large securities firms are offering lower commissions to build their performance, and smaller securities firms are doing so to secure new transactions, resulting in a 'self-cannibalization' competition. Furthermore, for securities firms, gaining the next business opportunity is more important than the IPO commission. Building a friendly relationship with the company is crucial, leading commissions to converge toward 0%, and it has become standard for payments to be received later under conditions favorable to the issuing company.
Another industry insider said, "Korea Investment & Securities has recently reduced the scale of its IPO division and focuses on pre-listing investments because it knows that the commissions earned from IPO underwritings are no longer profitable," adding, "At least large firms can participate in low-commission deals, but smaller securities firms are struggling in the environment of stock market stagnation and stricter IPO reviews."