Lowered Threshold
The Financial Services Commission (FSC) and the Korea Exchange announced new plans for corporate listing assistance on April 15. According to the plans, tech-oriented small and mid-size enterprises and venture firms now have easier access to the KOSDAQ, and the bourse has been separated from the Korea Exchange. The listing requirements for real estate investment trusts (REITs) have been eased, too.
The purpose of the roadmap is to improve IPO-based corporate financing conditions and revitalize the capital market. In short, any company considered to have sufficient technological strength and growth potential can be listed with ease on the stock market, regardless of business field or size.
Specifically, the FSC overhauls the existing technical evaluation criteria so that firms assessed by external evaluation agencies to own viable technology can be subject to the new minimum equity capital requirement lowered from 1.5 to 1 billion won (US$959,000), and they can be exempted from the clause prohibiting the listing of firms with impaired capital. The Korea Exchange’s advance procedure for assessing the eligibility of an exceptional listing is repealed, and that for the examination of corporate sustainability and management transparency are simplified as well.
The lock-up period in the KOSDAQ, that is, the period during which major stockholders’ share sales are prohibited after listing, has been halved to six months, while those who do not have to be subject to the share sale restriction can be excluded from the group of affiliate persons.
In the meantime, KOSDAQ has become fully independent of the Korea Exchange. The KOSDAQ Market Committee has been in test operations apart from the Board of Directors of the Korea Exchange since October of last year. The scope of rights of the committee is expanded from matters relating to listing systems and public announcements to cover screening and delisting.
Under the circumstances, a large number of KONEX firms are expected to move to the KOSDAQ. Any KONEX company that has generated over a certain size of operating profits for the last two years and is recommended by a designated advisor is allowed to do so. The minimum sales requirement for the transfer has been cut in half to 10 billion won (US$9.6 million), too. The FSC is planning to maintain the number of KONEX firms at over 100, by making the bourse look more attractive as a preparatory stage for listing on KOSDAQ.
When the plan is put in place, a total of 10 KONEX firms can be qualified for KOSDAQ listing in the second half of this year alone. Companies with angel investors and venture capital investment can enjoy some privilege for being listed on the KONEX as well. Those in which such investors own more than 20 to 30 percent of the shares can be listed with equity capital of not 500 million won but 300 million won (US$289,200) and sales of 500 million won (US$481,500) instead of 1 billion won.
The eased regulations have been applied to REITs, too. Until now, REITs had to complete their real estate acquisition procedure before going public, which practically prohibited them from being listed. However, funds procured through IPOs can be used from now on to acquire real estate properties.
In the KOSPI segment, the examination period has been shortened from 45 to 20 business days to encourage the listing of large-scale and blue-chip companies. Additionally, the distribution of shares is facilitated with the number of ordinary shareholders required reduced from 1,000 to 700. “More irrational and unnecessary regulations will be removed down the road so the capital market can have greater vitality,” said Lee Hyeon-cheol, director of the Capital Market Bureau of the FSC.