[Special Listing Pros and Cons] ① Accounting for Half of KOSDAQ IPOs... Lowering Market Entry Barriers to Revitalize the Market

Last Year, 46% of Listings Were Special Cases, 50% Expected This Year
KOSDAQ Market Revitalized... Contributing to Various Industry Activations

Editor's NoteSpecial purpose companies listed on KOSDAQ have been increasing every year. This year is no exception. Special purpose listing companies account for nearly half of all KOSDAQ listed companies. However, controversy continues as companies debuting on the stock market through special purpose listings face delisting risks one after another. There is a growing call to strengthen the requirements for special purpose listings to protect individual investors. On the other hand, since IPOs of highly growth-oriented companies through special purpose listings have been actively conducted, contributing to the development of the KOSDAQ market, there is considerable opposition to raising entry barriers as a solution.

Since the introduction of the technology growth company special listing in 2005, the number of special purpose listings on KOSDAQ has increased every year. According to the Korea Exchange on the 26th, from 2005 to 2014, 2 to 3 companies per year were listed through special listings, but this increased to around 10 companies annually from 2015 to 2017, and expanded further to 20 to 40 companies from 2018 to 2021. Last year, there were 30 companies listed annually, accounting for 45.5% of all KOSDAQ listed companies.

Special Purpose Listing Ratio at 39.3% Through April This Year

Based on securities registration statement disclosures, 28 companies have completed or are in the process of listing on the KOSDAQ market up to the third week of April this year. Among them, 17 companies are general listings, and 11 companies are special purpose listings. The special purpose listing ratio reaches 39.3%. Among the 35 companies that have submitted applications, 17 recorded losses last year, so the ratio of KOSDAQ special purpose listing companies is expected to approach 50% again this year.

The listing requirements for the KOSDAQ market are divided into ▲general companies: ①profitability and sales ②market evaluation and growth potential (unprofitable companies, Tesla requirements) ▲technology growth companies: ③technology expert evaluation ④business model expert evaluation ⑤growth recommendation. Except for ①, which evaluates listing requirements based on corporate performance, ② to ⑤ are classified as 'KOSDAQ special purpose listings.' Special purpose companies are granted eligibility to request preliminary listing examination as technology growth companies if the technology evaluation results from two professional evaluation agencies meet a certain grade or higher. Technology growth companies under special listing have some external requirements exempted or relaxed compared to general or venture companies.

The profitability and sales criteria are the most common listing requirements evaluating corporate performance. The market evaluation and growth potential criteria assess a company's growth potential based on market capitalization and other factors. This is also known as the 'Tesla requirement.'

Technology growth companies (technology expert evaluation and business model expert evaluation) must receive an evaluation of A grade or BBB grade or higher from professional evaluation agencies to be listed. Technology growth companies (growth recommendation) are evaluated for growth potential by the listing sponsor (securities firm).

Technology growth companies (technology expert evaluation) have been activated since March 2005, starting with Helixmith, gradually expanding beyond research and development-focused bio-pharmaceutical companies to various industrial sectors. Starting with unprofitable company Cafe24 in 2018, technology growth company (growth recommendation) Cellivery, and technology growth company (business model expert evaluation) Flitto in 2019, the increasing trend has continued to the present.

Experts attribute the continuous increase in special purpose listings to the 'diversification of fields.' The phenomenon of concentration solely on bio stocks is easing. Researcher Park Jong-sun of Eugene Investment & Securities analyzed, "This is because the growth of non-bio companies such as software, materials, parts, and equipment companies is remarkable." The diversification of special listing requirements also played a role. Researcher Choi Jong-kyung of Heungkuk Securities explained, "Since 2018, new listings applying various requirements such as unprofitable company conditions, business model expert evaluation, and growth recommendation have increased for technology growth company (technology expert evaluation) special listings."

Industry Revitalization and Economic Virtuous Cycle Effects

The effects of special purpose listings include market and industry revitalization. Senior Research Fellow Lee Seok-hoon of the Korea Capital Market Institute said, "The special purpose listing system has not only provided technology growth companies with opportunities to raise funds through IPOs but also demonstrated the possibility of discovering new companies worthy of listing through differentiated listing requirements," adding, "If the capabilities of technology evaluation for special purpose listing companies and investor protection related to special purpose listing companies are further strengthened, the special purpose listing system will invigorate the market as an important listing method in the KOSDAQ market."

Researcher Choi Jong-kyung evaluated, "The expansion of listings of technology-based companies with high expected growth based on various listing requirements is welcome across the market," and added, "Rather, the fact that market public offering funds can be used more valuably for companies whose revenue structures have not yet been fully established is expected to create a virtuous cycle effect for companies, the market, and ultimately the national economy." Researcher Park Jong-sun said, "Along with government support for revitalizing materials, parts, and equipment companies, the growth of software industries related to artificial intelligence (AI), big data, and visual effects (VFX) will continue to drive the increase in technology growth company listings," and added, "The expansion of listings of materials, parts, and equipment companies through various listing tracks will also help revitalize the materials, parts, and equipment industry."

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