Brokerages compete to lower fees in search of big deals

Rising interest rates have cast a shadow over corporate fundraising activities, with securities firms reducing fees to survive in this challenging environment.

According to industry sources on Thursday, COSMO AM&T Co. and COSMO Chemical Co. decided to pay a commission rate of 30 basis points (bps) based on the total subscription amount to securities firms participating as lead managers in their paid-in capital increases.

This is in stark contrast to the rate of 90 bps for Cosmo Chemicals’ public paid-in capital increases in 2019 and 2022.

The company has a presence in the stock market through its entry into the NCM cathode material business for secondary batteries, but it is unusual for the company to set the commission rate for its capital increase at the industry’s lowest level. Hanwha Ocean, which is pursuing a 2 trillion won ($1.5 billion) capital increase targeted for November, also pays 30 bps for underwriting fees.

The move also contrasts with SK innovation, which raised over 1 trillion won in paid-in capital increases this month and Lotte Chemical, which carried out a 1.2 trillion paid-in capital increase earlier this year, where the two companies offered commission rates in the 40 bps range.

CJ CGV and SK Innovation turned to capital increases to repay debts, but concerns are growing that large-scale capital increases could adversely affect stock prices as the local stock market remains stagnant. Securities firms are thus eager to increase their market presence and are racing to lower their fees to secure large transactions for new investments and business expansions.

A similar sentiment is also being felt in the IPO market, with Doosan Robotics offering an acquisition commission rate of 100 bps based on the number of newly issued shares. This rate is relatively low compared to other companies that recently joined the stock market, such as Padu (300 bps) and Nexteel (200 bps).