[Reporter’s Notebook] Communication Is Always the Issue

I occasionally meet CEOs of newly listed companies. When I congratulate them on their listing, they usually respond with complaints like, "It's a good thing, but after going public, there are so many things to worry about." They say that with more eyes watching, including shareholders, they have to pay a lot of attention to promotional activities such as investor relations (IR) meetings.

Most founders aim to "grow the company well and get listed on the stock market." However, listing is not the end but the beginning. If they raise funds from multiple investors and use them well, they can grow the company further. But because of this, they also have the obligation to explain the management situation well to shareholders and others.

If they do not actively communicate with shareholders and investors, misunderstandings are bound to arise. A representative case is the suspicion of "performance inflation" by Padoo, a newly listed semiconductor fabless company. Padoo's consolidated cumulative sales for the third quarter are 18 billion KRW, which is far short of the 120.3 billion KRW forecast announced earlier this year. Because of this, suspicions have been pouring in about inflated listings by the lead underwriter and the company, as well as sales by private equity funds (PEF) before the earnings announcement.

Such controversies are common among companies listed through the technology special listing system. It is often the case that the performance forecasts stated in the prospectus of technology special listing companies do not match the actual figures. However, what made this controversy more shocking was that a major IPO company with a market capitalization of 1.5 trillion KRW showed signs of collapse less than three months after listing.

In the future, controversies over performance inflation by technology special listing companies are likely to continue. This is because the valuation of most technology special listing companies, which are in deficit, is calculated based on future estimates when determining the public offering price. Estimated performance cannot be 100% accurate. There are numerous variables such as domestic and international economic conditions.

The means to narrow this gap is communication. In particular, IR is a lever that helps investors better understand the company's situation and build trust. In the stock market where countless information and rumors circulate, investors are more rational than expected. They can thoroughly grasp the company's past, present, and future. Moreover, with recent active shareholder activism, the influence of shareholders is also growing stronger.

After Padoo's stock price plummeted due to the earnings shock, the company belatedly explained the situation on its website. The investor relations meeting was held after the earnings announcement. It was like locking the barn after the horse was stolen. If they had proactively disclosed the relevant facts in advance and sought understanding, investors could have reduced their losses, and unnecessary controversies and misunderstandings could have been avoided.

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