Bad Forecasts Mean Bans For New Listing Managers

Stock-market regulators said Monday that they will ban 19 of Korea's 24 listed securities companies from managing initial public offerings on the local equity markets for one to five months from June 1. Under the law, the Korea Security Dealers' Association can take such action if an IPO misses the lead manager's earnings estimate by more than 30 percent (Korea Stock Exchange) or 50 percent (Kosdaq). Of 311 IPOs in 1999 and 2000, 69 fell short of the lead manager's estimates by those amounts, and 29 were in the red.

An association official said it took the action because too many companies were making too many wrong forecasts. An official at LG Investment and Securities Co. said it is unfair to be punished for being wrong, but agreed that the number of missed targets was too high. He said some local securities firms have been accused in the past of inflating earnings forecasts to get higher prices for their clients' offerings.

Securities firms to be sanctioned include Tong Yang Securities, Hyundai Securities and Daewoo Securities. They will be barred from arranging initial public offerings for companies to go public on the Kosdaq market for the next five months. Daewoo is also banned from managing initial public stock sales on the Korea Stock Exchange for one month.

by Lee Hee-sung