Following POSCO DX, L&F also escapes KOSDAQ... Relocation Encourages Further Moves

Moved SK Ocean Plant, BH, and NICE Information this year
Posco DX and L&F also decided to relocate... Celltrion Healthcare to be merged
Shareholders demand to escape KOSDAQ's negative image... Actual impact is limited

Since the beginning of this year, the number of companies moving from the KOSDAQ market to the KOSPI market has been increasing. Following SK Oceanplant, BH, and NICE Information Service, which have already transferred their listings, POSCO DX and L&F are also preparing to move. Including Celltrion Healthcare, which is pursuing a merger with Celltrion, three of the top five companies by market capitalization in the KOSDAQ market will effectively disappear.

On the 28th, L&F held a board meeting and resolved to pursue a transfer listing to the KOSPI market. They plan to hold an extraordinary general meeting of shareholders to approve the transfer listing agenda. Earlier, POSCO DX also resolved to transfer its listing at a board meeting on the 23rd and scheduled an extraordinary general meeting of shareholders for October 5th. The Celltrion Group is pushing forward with a merger between Celltrion and Celltrion Healthcare. If the merger contract is approved at the shareholders' meeting, Celltrion will remain as the parent company. If the merger is successful, shareholders of Celltrion Healthcare, a KOSDAQ-listed company, will receive shares of Celltrion, which is listed on the KOSPI market.

The combined market capitalization of Celltrion Healthcare, L&F, and POSCO DX reached 26.785 trillion KRW as of the closing price on the 29th. This accounts for more than 6% of the total KOSDAQ market capitalization of 443.515 trillion KRW.

The third highest number of transfer listings since 2000 this year

Even excluding Celltrion Healthcare, five companies have confirmed their transfer listings this year, marking the third highest number since 2000. The year with the most companies transferring to the KOSPI market was 2002, when seven companies including Korea Kolmar, Wooshin System, Shinsegae Construction, Kyobo Securities, Sejong Industrial, Samyoung, and Maniker moved. In 2003, six companies such as NCSoft, SBS, Kangwon Land, and Isu Petasys transferred. With five companies confirming transfers this year, the record of four companies in 2008 has been surpassed. Looking at the transfer listing records over the past three years, there were none in 2020, two in 2021, and one in 2022.

Most companies moving to the KOSPI market cited improved valuation and stable liquidity as expected benefits. They anticipated increased investment attractiveness through improved supply and demand. There is also an expectation that foreign and institutional investors will be attracted. A financial investment industry insider explained, "With Naver, which had significant symbolism in terms of business content and market capitalization, leaving the KOSDAQ market, a kind of illusion about transfer listings seems to have emerged," adding, "This has led to a vicious cycle where one transfer listing triggers another."

Sometimes, shareholder demands are strong. HLB, with a market capitalization approaching 4 trillion KRW, considered transfer listing at the company level due to ongoing shareholder demands. The HLB shareholder coalition expressed dissatisfaction with short selling and demanded a transfer listing. A representative from a listed company lamented, "In many cases, shareholders are the first to request a transfer listing when the decision is made," adding, "From the board's perspective, there is little justification to oppose a transfer listing."

Some in the financial investment industry point to the negative image of the KOSDAQ market as one of the causes for transfer listings. Due to relatively frequent incidents of embezzlement, breach of trust, and delisting of insolvent companies, the market has solidified an image as a "second division."

The transfer of flagship KOSDAQ-listed companies to the KOSPI market is not a new phenomenon. Right after the global financial crisis in 2008, Naver (then NHN), the company with the largest market capitalization, decided to transfer its listing, igniting concerns about the KOSDAQ market's crisis. At that time, NHN accounted for more than 10% of the total KOSDAQ market capitalization. The Korea Exchange even had its chairman intervene to dissuade the transfer, considering NHN's symbolic importance. The KOSDAQ Market Headquarters pledged to continuously discover good companies to fill NHN's void and worked to dispel the crisis narrative.

In 2008, not only NHN but also well-known companies to individual investors such as Asiana Airlines and LG Uplus transferred listings, heightening the crisis sentiment in the KOSDAQ market. Although 15 years have passed since NHN's departure, companies like Kiwoom Securities, Hana Tour, Kakao, and Celltrion continue to move to the KOSPI market.

Transfer listing effects are limited... Need to improve negative image

The financial investment industry expresses concern that the transfer listing of top market capitalization companies inevitably weakens the status and function of the KOSDAQ market as a core infrastructure of the domestic venture capital circulation system. The departure of leading companies could lead to market size reduction and a shrinking investor base. It may also discourage high-quality companies from newly entering the KOSDAQ market.

There is still much debate about the actual effects of transfer listings. The three companies that transferred to the KOSPI market this year have not seen significant benefits. NICE Information Service, which transferred on the 8th, saw its stock price fall from 12,000 KRW to 10,040 KRW. The foreign ownership ratio slightly decreased from 34.8% to 34.6%. Looking at BH, which transferred on June 20th, the foreign ownership ratio did not change much, increasing slightly from 8.04% before the transfer to 8.7% on the 29th. However, its stock price dropped 15.8% from 28,400 KRW to 23,900 KRW. SK Oceanplant began trading on the KOSPI market on April 19th. Its foreign ownership ratio rose slightly from 5.68% to 5.73%, and its stock price increased modestly from 21,800 KRW to 22,900 KRW. This year, the KOSDAQ index and KOSPI have risen by 34.9% and 14.1%, respectively. Despite the KOSDAQ market's rise being twice as high, its representative companies have been moving out one after another.

The Korea Exchange is making various efforts to strengthen the identity of the KOSDAQ market. For example, last year, it introduced the Global Segment to enhance the KOSDAQ market's brand value. The KOSDAQ Global Segment is a system that selects high-quality companies among KOSDAQ-listed firms by comprehensively considering market capitalization and management transparency. It is expected that once this system is established, it will attract mid- to long-term investment demand from institutional and foreign investors.

Lee Bu-yeon, Deputy Head of the KOSDAQ Market Headquarters at the Korea Exchange, said, "There are concerns about market contraction as leading companies leave the KOSDAQ market," adding, "We will continue to improve the market structure to increase incentives for large companies to remain in the KOSDAQ market." He also noted, "The Global Segment has not yet been fully established," and pledged, "We will steadily carry out planned projects to ensure its early establishment."

The U.S. NASDAQ market, where global companies like Apple and Microsoft are listed, firmly maintains its identity as a technology-focused market. For the KOSDAQ market to develop independent competitiveness like NASDAQ, it must provide reasons for high-quality listed companies to stay from a cost-benefit perspective. This is also a key concern for the KOSDAQ Market Headquarters. Lee emphasized, "We will improve the market structure to create a market with active participation from institutions and foreigners."

There are also arguments that the more venture companies with growth potential are continuously discovered and raise funds in the KOSDAQ market to grow, the more dynamic and positive the KOSDAQ market's image will become. A financial investment industry insider said, "Along with strengthened supervision by regulatory authorities, government support for nurturing venture companies is necessary," adding, "The influx of talent and capital into Silicon Valley in the U.S. is also a driving force behind NASDAQ's growth, which should serve as a lesson."

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