A view of the Korea Exchange in Yeouido, Seoul. Photo courtesy of the Korea Exchange
As the government has signaled the introduction of a “tiered segment” system starting next January to invigorate the Kosdaq market, companies preparing to go public will be able to list directly on the top-tier “Select” league (tentative name). This effectively creates an option to draw promising, high-quality companies to the Kosdaq market rather than the main Korea Composite Stock Price Index (KOSPI) market. However, since requirements including growth potential, profitability, and expected market capitalization will be stricter than existing Kosdaq listing standards, the number of companies able to enter the Select league directly is expected to be extremely limited.
According to the financial investment industry on the 2nd, the Korea Exchange (KRX) is reviewing a plan to allow companies preparing to go public to enter the Select league directly ahead of the implementation of the tiered segment system. While the exchange had initially prioritized a method of listing companies on the mainstream Standard league before promoting them, the move is interpreted as intending to provide a path for direct entry into the Select league in consideration of opinions from the venture business community. “We want to leave open the possibility for companies to pursue new listings targeting the Select league,” a KRX official said. “The detailed standards are still under review.”
If direct entry into the Select league becomes a reality, it is expected to encourage unicorn companies boasting “trillion-won” valuations to list on the Kosdaq. The initial public offering (IPO) industry’s reaction is also positive, based on the view that companies can devise various strategies suited to their needs as listing options expand. However, there is also considerable opinion that it will be applied to a limited range of industries, as the standards are likely to be stricter than existing Kosdaq listing requirements.
The Kosdaq market has faced the absence of representative stocks as one of its biggest challenges, after major leading stocks such as Celltrion, POSCO Future M, SK Oceanplant, and L&F left for the KOSPI in the past. Alteogen recently tentatively suspended its push to transfer its listing to the KOSPI, reflecting expectations for the policy changes.
As financial authorities plan to announce detailed guidelines for the tiered segment system as early as September, gathering opinions from the industry is also expected to proceed soon.