THE KOREA ECONOMIC DAILY, GLOBAL EDITION

While the market awaits the government's final decision on whether to extend its temporary ban on short selling, the investment banking industry is expressing concerns that lifting the ban could negatively impact planned rights offerings and initial public offerings (IPOs).

Korean companies have been raising capital via rights offerings with ease since the six-month ban took effect in mid-March, as the government measure prevented speculative investors from short selling to cut prices of newly offered shares.

Before the ban was introduced, institutional investors had often used short selling to seek windfall gains by purchasing new shares at lowered prices.

Over the past couple of months, Korean Air Co. and Jeju Air Co. raised as much as 1.13 trillion won and 150 billion won, respectively, in rights offerings. Multiplex cinema chain CJ CGV, drug maker HLB and Aprogen Pharmaceuticals Co. also successfully completed capital expansion plans.

Analysts say if short selling is allowed to resume in mid-September, some companies could again become the target of short sellers and see difficulty raising funds.

“I don’t think rights offering plans will be botched even if short selling is allowed again, but the amount companies can raise from such offerings would be much less,” said an executive in charge of corporate financing at a local brokerage. “They may have to readjust the size of the rights offering if the government decides to green light the speculative trading practice.”