Created to support the listing of companies with excellent future growth potential Technology special listing system For improvement, the Korea Exchange announced revisions to its regulations. If a company listed with special technology becomes insolvent, the responsibility of the securities company that hosted the listing also increases.
However, there was a large discrepancy between the recent estimated performance and actual performance, causing controversy. fadoNo measures were added to prevent cases like this. Accordingly, some are of the opinion that it is necessary to consider not only ways to increase the responsibility of the organizer, but also ways to ensure that market participants can obtain accurate information.
Preventing public offering from being fraudulent… The exchange that created the organizer’s responsibility device
On the 17th, the Korea Exchange announced revisions to the KOSDAQ market listing regulations and enforcement regulations to implement the ‘Technology Special Listing System Improvement Plan’.
This is a follow-up measure to the plan to improve the technology special listing system announced by the financial authorities last July. The authorities’ improvement plan includes easing the requirements for special technology listings to support financing for excellent small and medium-sized enterprises with cutting-edge technology. ▷Related article: ‘New super gap technology special case’… Opening of doors for special listings expanded (July 27)
As the listing entry requirements have been relaxed, safety measures have also been put in place while strengthening the mechanisms that provide responsibility for the underwriter.
The technology special listing is a system that helps companies that have excellent technology and have high future growth potential, but are not currently making profits, to raise funds through listing. However, during the listing public offering process, there is a side effect that the price may be inflated as the public offering price is calculated based on estimated future profits.
Therefore, in the event that a technology-exclusive listed company for which the management company arranged listing becomes insolvent, it was decided to strengthen responsibility by imposing additional conditions when organizing the listing in the future. The goal is to check the problem of price inflation by increasing the responsibility of the underwriter for the stock price of the company that arranged the listing.
The requirement for a technology-special listed company to become insolvent, as defined by the financial authorities, is when it is designated as an stock for management and investment ventilation by the exchange within two years of listing or when grounds for delisting arise. If a reason arises, the securities company that organized the listing of the company in question must provide a redemption claim (putback option) when arranging the listing of a technology-exclusive listed company in the future.
The right to claim repurchase is If the price of the public offering stock falls after listing, you have the right to request that the underwriter buy back the public offering stock. Investors in public offering stocks can exercise their right to repurchase from the underwriter and receive a refund at 90% of the public offering price.
The protection period for stocks compulsorily acquired by the underwriter will also be extended to 6 months. Currently, a three-month detention period is applied, but an additional three months are added here.
Improvements to the system are scheduled to be implemented from early January next year after receiving opinions from stakeholders and market participants and receiving approval from the Financial Services Commission.
Improvement plan that does not prevent fado controversy… “Report exemption requirements need to be adjusted”
According to the method in which the revision is currently anticipated, the device for assigning responsibility to the lead company only applies when the company becomes insolvent. Therefore, shocking cases such as the recent ‘Fado’ case where performance significantly deviates from estimates are not applied.
Controversy arose when Fado announced that its sales in the second and third quarters of this year were only 59.4 million won and 320.81 million won, respectively. To date, cumulative sales for the third quarter are approximately KRW 18 billion, making it virtually impossible to achieve this year’s sales estimate of KRW 120.3 billion stated in the securities report at the time of listing. Immediately after listing, it appeared to be having difficulty achieving the estimated performance, and the sentiment that there was a bubble in the public offering price grew and the stock price plummeted.
As these problems emerged, the theory of responsibility for the organizer also arose. At the time of submitting the securities report, it was the end of June, a time when a sharp decline in Fado’s second quarter performance could be expected. Accordingly, the Financial Supervisory Service is investigating Fado and its underwriters, NH Investment & Securities and Korea Investment & Securities.
However, experts also express the view that it is difficult to strengthen the system by holding the organizer responsible for failing to meet the estimated performance. This is because it is not easy to accurately estimate future performance due to the nature of technology-exempt listed companies.
Instead, looking at the recent case of Fado, there is room for improvement in the system related to disclosure. Fado was listed on August 7th and was exempt from the semi-annual report to be submitted by August 14th, but the shock was greater because the market was unable to obtain information in advance.
Choi Jong-gyeong, a researcher at Heungkuk Securities, said, “Fado was exempted from filing a semi-annual report in the second quarter, and the shock was even greater as the second quarter performance was revealed through this third quarter report.” “There is a need to improve in the direction of announcing provisional results, even if it is not a review report,” he said.