Performance and Stock Prices Both Decline... Listed VCs Face Difficulties

Listed VC Stocks, All but 3 Down from Early Year
Over 60% Show Negative Growth in First Half
Rebound Amid Cold Wave... Q4 Interest Rate Cut Expected as Positive Factor

Both earnings and stock prices are retreating. This is about venture capital (VC) firms listed domestically. Most listed VC stock prices have fallen compared to the beginning of the year. Earnings also shrank in more than 60% of them in the first half of this year.

According to the Korea Exchange on the 23rd, as of the previous day's closing price, the stock prices of 15 out of 18 VCs listed on the domestic stock market declined compared to the closing price on January 2. Only three VCs saw their stock prices rise compared to the beginning of the year: Wooree Tech Investment (6810→7450 KRW), DSC Investment (3150→3175 KRW), and M Ventures (834→921 KRW). M Ventures has been suspended from trading since March due to a delisting cause arising from a refusal of audit opinion on its 2023 financial statements. Considering this, effectively only Wooree Tech Investment and DSC Investment have seen stock price increases this year.

A VC with a 68% stock price drop... 11 out of 18 show earnings 'retreat'

VCs are classified as an unpopular sector in the domestic stock market. The perception of "risky capital" remains strong, and shareholder return policies such as dividends are less attractive compared to other sectors. Stock prices sometimes spike briefly when news of investment exits or large-scale new investments emerges, but most often they return to their original levels after a while. Plutos saw a stock price drop of 68%, and Daesung Venture Capital (-40%), Stonebridge Ventures (-39%), and Capstone Partners (-32%) also experienced declines exceeding 30%. Considering that the KOSDAQ index, where these companies are listed, fell about 10% this year, these are very significant drops.

Decisively, poor earnings performance has held back stock prices. Excluding M Ventures, which is under trading suspension, a review of the half-year reports of the remaining 17 firms shows that fewer than half, only seven, increased operating profit compared to the previous year. These include Wooree Tech Investment (47.2 billion KRW → 96.6 billion KRW), Now IB (2 billion KRW → 26.2 billion KRW), Daesung Venture Capital (-1.2 billion KRW → 8.5 billion KRW), Atinum Investment (-1.7 billion KRW → 6.8 billion KRW), Stonebridge Ventures (4.5 billion KRW → 4.9 billion KRW), Plutos (-4.8 billion KRW → 4 billion KRW), and HB Investment (800 million KRW → 1.9 billion KRW). The other 11 firms experienced negative growth. SV Investment (-2.7 billion KRW) and TS Investment (-2.1 billion KRW) even turned to losses.

Direct hit from the 'venture cold wave'... rebound expected in Q4

VC earnings consist of valuation gains from venture funds and disposal gains from exits. In particular, valuation gains have been directly hit as the recent market downturn has lowered the valuations of venture and startup companies. Youngcheol Noh, Head of Management at Aju IB Investment, said, "The valuations of portfolio companies that were highly valued during times of abundant liquidity are decreasing, which directly affects valuation gains." He added, "Many unicorns (startups valued at over 1 trillion KRW) that once boasted valuations in the trillions have shrunk below 1 trillion. Companies invested in years ago are now going public (IPO) at these reduced valuations, which is reflected as losses."

To make matters worse, the Teachers' Pension and Government Employees Pension have decided not to invest in VCs this year. This confirms the conservative stance of institutional investors toward VC investments. However, as the amount raised by venture investment associations in the first half increased by 20% year-on-year to 2.3504 trillion KRW, signs of market recovery are emerging, leading to cautious expectations that earnings and stock prices may rebound. Additionally, the VC industry is hopeful that if the U.S. Federal Reserve's 'pivot' (monetary policy shift) begins in September, interest rate cuts are likely, which could be a positive factor for fundraising.