[IPO Spotlight] 'Kosdaq 3rd Attempt' Jaram Technology, What’s Different This Time?

[Asia Economy Reporter Jang Hyowon] Jarum Technology, a semiconductor design company for telecommunications, has made its third attempt to enter the KOSDAQ market. This time, it lowered its sales forecast to rationalize the public offering price and will not conduct any sale of existing shares. It also plans to highlight the expanded business operations, including the commercialization of its main product, the telecommunications semiconductor XGSPON chip, in the ultra-high-speed internet market.

According to the Financial Supervisory Service's electronic disclosure, on the 19th, Jarum Technology submitted its third securities registration statement to the Financial Services Commission, signaling its re-challenge for KOSDAQ listing. Previously, Jarum Technology had submitted and voluntarily withdrawn securities registration statements twice in October and December of last year.

Jarum Technology is a fabless company designing telecommunications semiconductors. Its core products include telecommunications semiconductors (XGSPON chips) and pluggable products combining these with optical components (XGSPON SFP+ ONU or XGSPON stick), as well as optical transceivers and Gigawire.

Baek Junhyun, CEO of Jaram Technology, is introducing the company at an initial public offering (IPO) press conference held on December 2 last year at the Federation of Korean Industries building in Yeouido, Seoul. Photo by Jaram Technology

The XGSPON chip is a telecommunications semiconductor that enables one-to-many communication. Previously, telephone exchanges and base stations were connected individually by optical cables, but the XGSPON chip can form a network that aggregates multiple base stations, allowing communication through a single optical cable. As the era evolves into 5G and 6G, the distance radio waves can reach shortens, increasing the number of base stations. This technology is expected to become important for reducing infrastructure construction costs and improving data transmission efficiency.

However, so far, Jarum Technology's performance has mostly come from optical transceivers, Gigawire, DVT (Philips personal recorder brand), and SOC (system on chip). Up to the third quarter of last year, Jarum Technology recorded sales of 13.6 billion KRW, operating profit of 1.1 billion KRW, and net profit of 1.5 billion KRW. Sales of XGSPON chips and related products were around 100 million KRW.

Accordingly, Jarum Technology utilized a technology special listing to reflect the growth potential of the XGSPON chip in the public offering price. While general listings evaluate corporate value based on existing performance, the technology special listing method allows corporate value to be assessed by discounting future performance. This method is mainly used by companies with technology but currently operating at a loss. Jarum Technology received an A grade from both Korea Evaluation Data and the Korea Technology Finance Corporation for its XGSPON chip manufacturing technology.

When it first pursued listing in October, Jarum Technology estimated sales of 81.2 billion KRW and net profit of 16.6 billion KRW for 2024. While sales of currently performing products like Gigawire and optical transceivers were steady, it assumed a significant growth in sales related to XGSPON chips.

However, the company stated, "At that time, some customers requested adjustments to the delivery dates of previously ordered quantities, leading us to revise sales estimates and reassess corporate value, which resulted in withdrawing the securities registration statement."

The second securities registration statement submitted in December last year was withdrawn due to lack of active participation in demand forecasting by institutions. There were concerns about the feasibility of the estimated sales amid uncertainties in 5G investments by front-line telecommunications companies, and the relatively low purchase price of shares by existing institutional investors compared to the public offering price also hindered progress.

Therefore, in the third securities registration statement, future sales were estimated more conservatively, lowering the public offering price. The estimated sales for 2024 were reduced by 26% from 81.2 billion KRW to 59.8 billion KRW. Correspondingly, the desired public offering price range was lowered from 18,000?22,000 KRW to 16,000?20,000 KRW.

Additionally, the number of shares offered was reduced from 1 million to 930,000 new shares, the minimum quantity satisfying the small shareholder dispersion requirement, and the sale of 100,000 existing shares was completely eliminated. The CEO and major shareholders are subject to a two-year lock-up, and most existing shareholders have lock-ups ranging from 1 to 6 months. The post-listing free float ratio is about 14.14%.

A representative of Jarum Technology explained, "Our core product, the XGSPON chip, can be applied not only to 5G but also to the rapidly growing global ultra-high-speed internet market following the pandemic. We have actually signed additional supply contracts with customers in India and North America, and contracts with customers in Europe, Australia, and Taiwan are imminent. The BMT for upgrading ultra-high-speed internet service equipment of domestic telecommunications operators has also been successfully completed, paving the way for full-scale commercialization."

Meanwhile, Jarum Technology's demand forecast for institutional investors is scheduled for February 15?16, and subscription for general investors will be held on February 22?23. The lead underwriter is Shin Young Securities.