Korean retail investors could be shut out of SpaceX IPO

South Korean retail investors are unlikely to gain access to SpaceX’s planned $1.75 trillion US initial public offering, as regulatory and structural hurdles are making the proposed framework difficult to implement , market sources said Monday.

At the center of the issue is an unprecedented attempt by Mirae Asset Securities to secure an allocation in a US IPO and distribute it to domestic retail investors — a structure that does not neatly fit within Korea’s existing rules.

The brokerage has internally concluded that meeting Korea’s regulatory requirements within the expected June listing timeline is “practically impossible,” according to sources familiar with the matter.

As a result, it is reviewing a fallback plan to channel any secured shares through private funds aimed at institutional investors, effectively sidelining retail participation.

“The firm remains in talks with SpaceX to secure shares, though previously cited figures — including around $5 billion — have yet to be finalized,” a source said. “Even if an allocation is secured, the structure is the bigger hurdle.”

Regulators are now assessing whether such a structure can be allowed at all. The Financial Supervisory Service is reviewing Mirae Asset’s proposal but is said to be skeptical, citing the lack of precedent for allocating overseas IPO shares to Korean retail investors through a public subscription system.

The core challenge lies in the mismatch between IPO frameworks in Korea and the United States. In the US, pricing and share allocation are largely determined by lead underwriters within the disclosure regime overseen by the US Securities and Exchange Commission. There is no fixed quota system for retail investors.

Korea, by contrast, operates an IPO structure that mandates pre-set allocations among institutional investors, retail investors and employee stock ownership plans, alongside detailed formulas governing retail subscriptions. Applying that framework to a foreign IPO raises technical and legal complications.

“Whether subscriptions will be allowed has not been decided,” a financial authority official said. “Structural differences between the US and Korean IPO systems must be considered, including procedures such as the effective period of registration statements.”

Beyond allocation mechanics, the issue has triggered broader regulatory questions. Authorities are reviewing how foreign IPOs marketed to Korean investors should be treated under domestic securities laws, including whether overseas issuers would need to meet Korean disclosure and registration standards.

Other major financial hubs tend to take a more flexible approach. While US IPO access is generally limited to accredited investors, markets such as Singapore and Hong Kong allow brokerages to redistribute secured allocations to individuals under certain conditions.

The timing also reflects a broader policy backdrop. The Lee Jae-myung administration is seeking to redirect retail capital into domestic equities, even as Korean investors continue to favor overseas markets.

As part of that effort, the government introduced the “return investment account” (RIA) last month, offering tax incentives for repatriation. Investors who transfer overseas stocks into an RIA, sell them and reinvest in Korean equities are exempt from the 22 percent capital gains tax on those holdings.

Even so, demand for foreign equities remains robust. Korean investors were net buyers of about $11.5 billion worth of US stocks in January, according to Treasury data, the second-largest among major economies after France, excluding Ireland. Popular picks include Tesla and Nvidia.

Regulators are also weighing potential market impact. Given the expected scale of the SpaceX IPO, large volumes of funds flowing overseas over a short period could add pressure on the foreign exchange market.

Authorities have already warned Mirae Asset to refrain from “excessive marketing,” citing concerns that promoting an unprecedented structure could confuse investors.

For now, Korean investors can access overseas stocks through direct trading or exchange-traded funds. Allowing participation in IPO-style subscriptions would effectively bring foreign listings within Korea’s regulatory perimeter — a shift that could significantly increase the compliance burden for both regulators and brokerages.

“This is the first attempt at a simultaneous offering in the US and Korea, so there are challenges,” a Mirae Asset official said. “We will begin full discussions once the allocation size becomes clearer.”

ch0221@heraldcorp.com