"Impact of the 2nd Venture Boom"... Venture Stock Options Granted to Over 6,000 People Last Year

Ministry of SMEs and Startups Announces Analysis of Venture Stock Option Status
System Introduced in 1998...Tax Benefits and Other Incentives
985 Granted Stock Options Exceeding 100 Million KRW Last Year
78.5% New Shares Issued...Mostly Granted to Executives and Employees

[Asia Economy Reporter Kim Bo-kyung] Recently, the scale of stock options granted by venture companies has been rising to levels seen during the 2000 venture boom. Last year, the number of people granted stock options worth over 100 million KRW nearly reached 1,000.

The Ministry of SMEs and Startups analyzed the status of stock option grants by venture companies from 1998 to 2020 and announced the results on the 29th.

Stock options are a system that grants the right to purchase a certain number of company shares at a favorable price. Since 1998, the Ministry of SMEs and Startups has introduced and operated stock options to support the attraction of talented personnel to venture companies.

Stock options for venture companies are characterized by preferential treatment in terms of eligible recipients and tax benefits compared to those of general corporations and listed companies.

Since the introduction of the stock option system in 1998, 4,340 venture companies have granted stock options to 67,468 people (based on companies reported to the Ministry of SMEs and Startups).

The most stock options were granted in 2000, during the venture boom (456 cases, 8,337 people), after which the granting of stock options sharply declined but rapidly increased again from 2017, with 451 cases granted to 6,174 people last year.

Venture companies granted an average of 7,978 shares per individual, with an average grant exercise price of 42.8 million KRW.

Cases where the grant amount per person was 10 million KRW or less accounted for 40.8%. Cases exceeding 100 million KRW have also been increasing.

The number of people granted stock options exceeding 100 million KRW was 576 (11.6%) in 2018, 724 (13.4%) in 2019, and 985 (16.0%) last year.

Stock options can be granted through three methods: issuance of new shares, transfer of treasury shares by the venture company, or cash or treasury shares as compensation for the difference between the exercise price and market price.

Looking at the granting status over the past three years, issuance of new shares accounted for the largest portion at 78.5%.

Most venture companies grant stock options to executives and employees (96.3%), and by industry classification, manufacturing (33.7%), information and communication (31.9%), and scientific and technical services (26.8%) make up the majority.

Meanwhile, the Ministry of SMEs and Startups plans to significantly raise the tax exemption benefit for venture company stock options from 30 million KRW to 50 million KRW based on exercise gains starting next year.

This is the highest level since the tax exemption system for venture company stock options was abolished in December 2006 and reintroduced in January 2018.

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