Lowering Listing Barriers and Improving Evaluation... Exchanges Hastily Reach Out to Unicorns

Despite persuasion from the Korea Exchange, Market Kurly decides to list in the US
The exchange belatedly initiates listing system reform
Concerns over repeated failures of 'Tesla requirement listing system'

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] "We wanted to attract Market Kurly's domestic listing, but the company's position is firm on (a U.S. listing)."

Recently, an executive from the Korea Exchange (KRX) who met with reporters expressed this sentiment with regret. He said, "Coupang's headquarters are located in the U.S., and many of its executives hold U.S. citizenship, so choosing a U.S. listing was natural. However, we wanted to attract Market Kurly's domestic listing, but the company's position was clear on (a U.S. listing)."

As Coupang became the first company since 1999's high-speed internet service provider 'Duranet' to directly raise large-scale funds on the U.S. stock market, domestic unicorns (unlisted startups valued at over 1 trillion won) are rushing to head to the U.S. Although the government and the Korea Exchange have started to prepare countermeasures, there are criticisms that they are a step behind. However, there is also analysis that domestic listings remain advantageous in terms of costs and that additional attraction may be possible depending on future policy developments.

According to the industry on the 5th, Sohn Byung-doo, chairman of the Korea Exchange, announced the 'Five Core Strategic Directions' on the 31st of last month at the Korea Exchange Seoul building in Yeouido, Yeongdeungpo-gu, Seoul, and pledged to actively attract unicorns for domestic listing. The main point is to evaluate future growth potential more highly than immediate results in the listing review.

First, from the 9th of last month, a sole requirement of a market capitalization of 1 trillion won was newly established, while the market capitalization and equity capital requirements were lowered from the previous 600 billion won and 200 billion won to 500 billion won and 150 billion won, respectively. They plan to create qualitative review criteria suitable for growth companies and involve technology evaluation experts from various fields in the review process. To revitalize KOSDAQ listings, the management system for technology-special listing will also be improved. Additionally, the government is planning to create a Business Development Company (BDC) to serve as a channel for companies to raise funds and to discover and provide potential investment targets to investors.

However, since these are maintenance-level approaches rather than revolutionary improvements, there are criticisms that they are insufficient to attract companies' attention. An industry insider from a venture capital (VC) firm said, "It feels like d?j? vu with previously proposed 'Tesla requirements (special listing for unprofitable companies)' and similar measures," expressing concern about how quickly growth potential can be evaluated amid rapidly changing corporate ecosystems and industries. The Korea Exchange implemented the 'Tesla requirements listing' system in January 2017 to allow listings based on growth potential even for loss-making companies, but only seven companies have been listed on the KOSDAQ market through this method over the past four years, most of which are biotech firms.

In terms of listing costs, since the domestic stock market is advantageous, there is also a prospect that unicorns can be attracted if trust is built through future policy design. A Chief Investment Officer (CIO) of a KOSPI-listed company explained, "Listing on the U.S. stock market can cost from 400 million won to over 1 billion won annually just for external audits and listing maintenance. Considering that the cost of maintaining a listing on the domestic stock market is around 200 million won, it is still cost-effective, and potential costs could be further reduced when considering concerns such as class-action lawsuits."

This content was produced with the assistance of AI translation services.