Request for supplementation of capital market reform plan
Concerns over decrease in trust and the effect of dropout
Major venture industry associations, including the Venture Business Association, the Korea Venture Capital Association, and the Korea Startup Forum, proposed five policy tasks, asking financial authorities to review capital market reforms, including the implementation of KOSDAQ segments.
At a joint policy proposal press conference held at the Kensington Hotel in Yeouido, Seoul at 2 p.m. on the 15th, the Venture Business Association proposed five policy tasks related to the reorganization of the capital market to the financial authorities.
The meeting was organized to officially convey the concerns and supplementary tasks of the venture and start-up industry on strengthening the requirements for delisting and reforming the capital market, which is being pursued by financial authorities.
The association said, "We actively agree with the government and financial authorities' awareness of the problem, which has made the KOSDAQ market a key agenda for capital market reform, which has lacked policy interest," but added, "If the capital market reform remains only in regulation and management, the original function of the capital market to supply growth funds to innovative companies could be reduced."
In particular, the industry said that if the current reform plan is implemented as it is, confidence in the policy will be reduced due to the lack of sufficient discussion, while mass-producing companies subject to delisting on a uniform basis, which could damage general shareholders. It also pointed out that not only the polarization in the KOSDAQ market intensifies, but also weakens the capital raising function of listed companies.
The association emphasized that "Cosdaq is not just a stock trading market, but a channel for raising capital for venture companies, a recovery market for venture investment, and even a growth infrastructure for Korea's innovative economy."
The association explained that the KOSDAQ reorganization is a problem for the entire venture ecosystem. As of the end of April this year, 1,274 companies (79.5%) and 81.1% of the 1,603 KOSDAQ listed companies had venture history. Venture companies account for 89.8% (114 companies) out of 127 companies listed with special technology over the past four years.
On this day, the cooperative group proposed five policy tasks, including △ suspension and review of KOSDAQ segment enforcement △ exception to regulation prohibition of duplicate listing △ suspension of enforcement of delisting requirements and reconsideration of standards △ permanentization of policy consultative body △ supplementation of special technology listing system.
First, the implementation of the KOSDAQ segment can lead to the effect of dividing the KOSDAQ into "premium" and "standard" to fix the ranking in the market and branding the companies incorporated into the standard as non-premium companies. In the case of regulations prohibiting duplicate listings, the regulatory standards should not be viewed as duplicate listings, but should comprehensively judge whether the controlling shareholder has taken over private interests, whether general shareholder protection is secured, and business independence. It also said that it is necessary to prepare a separate screening track for venture companies and innovative growth companies or exceptions for national strategic industries and VC investment companies.
In the case of delisting requirements, he agreed to restore market trust through the exit of insolvent companies, but pointed out that the future value of innovative companies should not be judged only by quantitative indicators such as market capitalization, stock prices, and capital erosion. Companies that are close to the delisting criteria are recognized as "concerned delisting companies" in the market, causing further declines in stock prices and difficult financing conditions due to preemptive selling. The association said, "The application of the market capitalization of 30 billion won scheduled for January 1, 2027, needs to be suspended and reviewed after sufficient discussion and opinion collection."
The association argued that prior opinion collection and industry impact assessment should be regularized through a permanent policy consultative body involving financial authorities, the Korea Exchange, government ministries (Ministry of SMEs and Startups), and venture industries. This is because the reorganization of the capital market system directly affects the financing, investment attraction, listing strategy, and recovery market of venture companies. In addition, it said that the current technology special listing system should be supplemented to reduce the standard deviation of each evaluation agency. He also pointed out that it is necessary to establish a balance between investor protection and financing of innovative companies by preparing evaluation guidelines and standard scope of due diligence for each industry.
In addition, the three cooperative organizations also proposed the establishment of a separate policy support project for KOSDAQ-listed venture companies. For venture companies before and after listing, policy support is needed to diagnose suitability for listing, prepare for special technology listing, scale-up strategies after listing, and respond to capital market issues.
Song Byung-joon, president of the Korea Venture Business Association, said, "The revitalization of KOSDAQ is a long-term task of the venture ecosystem that no government has solved for the past 20 years, and I sincerely thank the current government for showing a clear willingness to solve it." "However, the 'KOSDAQ 3000 Era' proposed last year has not been felt fundamentally even a year later, but the polarization between KOSPI and KOSDAQ has intensified." The index rose, but not everyone rose," he said.
"The key to the healthy operation of the venture investment ecosystem is the smooth circulation of funds, and KOSDAQ is a non-fungible core recovery stage," said Kim Hak-kyun, president of the Korea Venture Capital Association. "If the virtuous cycle of venture capital taking risks and investing and recovering them in a timely manner and reinvesting them is broken, the entire ecosystem can die."
"Uniform regulation of KOSDAQ segment separation or overlapping listing will lead to artificial corporate ranking and funding cliffs, paralyzing the venture capital ecosystem," he said. "This capital market reform should not be an obstacle to the scale-up of innovative companies."
Kim Jae-won, chairman of the Korea Startup Forum, said, "If we weigh only on withdrawal and regulation, even innovative startups that are in desperate need of funds will shrink."
"Regulation is the bank that protects the market, but if you build it too high, even the waterways dry up," he said. "Please clear up the insolvency but keep the financing channel for innovative companies."
