Korean stocks face overhang as 230 mil. shares come off lock-up

Nearly 230 million shares in listed companies are set to exit mandatory lock-up restrictions this month, sparking worries about a potential stock market overhang, according to industry officials. The mandatory lock-up system prohibits specific shareholders, such as major holders, from selling their shares for a predetermined period following a company's initial public offering (IPO).

This policy aims to prevent a sudden surge of shares, which could adversely affect other investors. Once the lock-up period concludes, the shares become freely tradable. The accumulation of a substantial number of shares hitting the market can trigger a selling frenzy, as investors anticipate the rise in supply and potentially dump their holdings, creating downward pressure on the stock price and possibly triggering further sales.

This scenario is referred to as an "overhang" by investors. The situation is particularly concerning for companies whose shares are currently trading significantly below their IPO prices. If a considerable amount of newly unlocked stock is sold into a weak market, it could exacerbate selling pressure and amplify losses for existing shareholders.

In total, 229.48 million shares belonging to 38 listed companies will be released from lock-up restrictions this month, potentially impacting market stability and investor sentiment.