In a Korean forfeited-share public offering, a subscription ratio above 1,000:1 means a deposit of 100 million won buys shares you can count on one hand. In SKC's rights issue, 23,687 forfeited shares drew 25,409,333 shares of retail subscription, for a final ratio of 1,129.20 to 1. The name resembles an IPO subscription, but both the allocation mechanics and the moment the price is fixed are different.
Two questions remain. When does the issue price harden, and how large a share-price decline does that discount actually absorb? Both are answerable from disclosure language and arithmetic.
The final issue price is locked before you subscribe
A rights offering with forfeited shares sold to the public prices itself twice. STX's securities registration statement shows the first issue price set from a base date three trading days before the record date: the lower of (a) the average of the one-month, one-week and base-date volume-weighted average prices and (b) the base-date VWAP, with a 22% discount applied. The second issue price repeats the exercise from a base date three trading days before existing shareholders begin subscribing, using only the one-week and base-date VWAPs.
The final price is the lower of the two. There is a floor, however. The same filing states the final price cannot fall below 60% of the volume-weighted average price over the third through fifth trading days before the subscription date — a 40% discount ceiling in plain terms.
The discount rate itself is the issuer's choice. The rule capping general public offerings at a 30% discount to the base price sits in the Regulation on Issuance and Disclosure of Securities, but when forfeited shares from a rights issue are offered to the public, the price already set at the rights stage carries over. That is why real filings show discounts as varied as 22%, 25% and 40%.
By the time retail investors subscribe, the price is a single fixed number. There is no book-building band that moves with demand, as in an IPO.
What a 1,129:1 ratio allocates
The subscription deposit is 100% of the issue price. Allocation is pro rata by subscription quantity at the combined ratio for each subscriber class, with leftover fractional shares distributed by lottery. In the SKC case, that lottery covered retail subscribers in 10,000-share units and high-yield investment trusts in 23,687-share units.
Applying the 1,129.20:1 ratio directly, allocated shares equal subscribed shares divided by the ratio. Assuming an issue price of 10,000 won, the deposits and outcomes look like this.
| Shares subscribed | Deposit required (KRW, at 10,000/share) | Pro rata allocation (shares) | Actual allocation (shares) |
|---|---|---|---|
| 1,000 | 10,000,000 | 0.89 | 0 or 1 (lottery) |
| 5,000 | 50,000,000 | 4.43 | 4 + lottery |
| 10,000 | 100,000,000 | 8.86 | 8 + lottery |
| 50,000 | 500,000,000 | 44.28 | 44 + lottery |
| 100,000 | 1,000,000,000 | 88.56 | 88 + lottery |
A deposit of 100 million won yields eight shares — 80,000 won of stock. Even at a 30% discount, the paper gain sits in the low tens of thousands of won. Once the ratio passes three digits, a forfeited-share offering stops being about how much capital you commit and becomes a fractional-share lottery.
Offerings that close in single digits exist too. A subscription rate of 441% implies an allocation rate above 22%, so 1,000 shares subscribed brings in more than 220. Same mechanism, opposite character. What separates the two is not the issuer's size or sector but how many shares were forfeited: when existing shareholders take up more than 99% of their rights, the public tranche is under 1% of the entire offering.
There is no equal-allocation floor guaranteeing a minimum per account, unlike an IPO. The arithmetic differs entirely from the point where equal and proportional IPO allocation diverge at a single share.
How far a 25% discount carries you
Two to three weeks usually separate the day the final price is fixed from the day the new shares list. For SKC, allocation and refunds fell on 22 May and the additional listing was scheduled for 8 June. Price movement across that gap belongs entirely to the subscriber.
The math is simple. With base price S and discount d, the issue price is S×(1−d). If the price at listing has fallen by x from the base price, the return is (1−x)÷(1−d)−1. That equals zero when x=d — meaning the break-even decline is exactly the discount rate.
| Discount | Price flat (%) | Down 10% (%) | Down 20% (%) | Down 30% (%) |
|---|---|---|---|---|
| 20% | +25.0 | +12.5 | 0.0 | −12.5 |
| 25% | +33.3 | +20.0 | +6.7 | −6.7 |
| 30% | +42.9 | +28.6 | +14.3 | 0.0 |
| 40% | +66.7 | +50.0 | +33.3 | +16.7 |
Subscribe to a 25%-discount offering and, if the stock sits 25% below the base price on listing day, you are exactly even. A 40% discount looks generous on paper, but needing to cut 40% to clear the shares is itself a signal about the offering's terms. And when a stock slides right after a rights issue is announced, the base price has already come down, which shrinks the felt value of the discount.
What a subscriber buys in a forfeited-share offering is not the discount but the two to three weeks that sit between the fixed price and the listing date.
Supply pressure compounds it. All the newly issued shares hit the market at once on the additional listing date. An offering that expands share count by 20% dilutes existing holders by 16.7%. Unlike the way a bonus issue mechanically resets the reference price on the ex-rights date, a rights issue brings real cash into the company, so the per-share value effect does not reduce to a single formula.
How the public tranche is divided
Not all forfeited shares go to individuals. Under the STX filing, 5% of the offered shares go first to high-yield investment trusts, with the remaining 95% allocated to retail and institutional subscribers without distinction — meaning individuals compete in the same pool as institutions.
There is one more mechanism at the rights stage: over-subscription. The same filing allowed existing shareholders to over-subscribe by 0.2 shares for each share of their entitlement. The more of that capacity shareholders use, the fewer shares reach the public tranche — which is how ratios climb into four digits.
Underwriting fees appear in the filing as well. The STX offering paid 1.8% of gross proceeds, split 62.5% to the lead manager and 37.5% to the co-underwriter. Underwriters absorb whatever shares remain unsold, so fee rates tend to rise with the odds of being left holding stock.
What to watch
- Existing-shareholder take-up rate — above 99% and the public tranche shrinks below 1% of the offering. Check the disclosure filed just before subscription.
- Gap between the final issue price and the current price — the discount to the closing price on subscription day is the real margin of safety, a different number from the headline discount rate.
- Days between allocation and additional listing — the longer the gap, the longer the exposure to price movement.
- New shares relative to existing share count — dilution = new ÷ (existing + new). A 20% offering means 16.7%.
- Use of proceeds — debt repayment versus capital expenditure or R&D changes how the stock trades after listing.
- Over-subscription ratio — 0.2 shares per entitlement is common but varies by issuer; a higher figure means an even thinner public tranche.