[Editorial] The Weight of 'Going Public'

"There were discussions about going public during the previous chairman's tenure, but in the end, we didn't do it. Looking back now, I sometimes think it was the right decision not to go public."

This is what a third-generation owner of a mid-sized conglomerate recently told me. This group has 14 affiliates, all of which are unlisted companies. Because they have sufficient financial resources, they do not feel the need to go public. There are also practical benefits. The main methods for a company to raise capital are broadly divided into debt capital (issuing bonds) and equity capital (stock listing or IPO). Bonds, which only require interest payments, are generally considered to have lower funding costs than stocks. In the case of stocks, there is the risk of equity dilution, and profits must be shared over a long period through dividends and other means. For these reasons, it is not always wise to pursue a public listing just for the sake of being labeled a 'listed company.'

Yoshiaki Murakami (born 1959), who made his name as an activist investor in Japan by establishing the 'Murakami Fund' in 1999, recounts his meeting with Takafumi Horie (born 1972), CEO of Livedoor, in 2005 (from the book "Lifelong Investor").

Murakami: "Compared to the cash and other assets you hold, Livedoor's stock price is extremely low, and it doesn't seem like you have any major investment projects. In this situation, our fund should boldly consider investing."

Murakami said he still cannot forget Horie's response to his comment.

Horie: "Listing our shares means that we have become a public entity. This means anyone can buy our shares on the market. For a fund, it is only natural to buy when it is cheap and sell when it is expensive. Now that we are listed, regardless of who becomes the largest shareholder, I will run the company to enhance its value under that shareholder."

Horie remained confident even in the face of somewhat aggressive and sensitive remarks from the giant of activist funds. This was because he was fully aware of the risks of going public and had a firm belief in shareholder-oriented management. True to his convictions, in 2005, Horie attempted to acquire Nippon Broadcasting (M&A), causing a stir across Japan. Since Nippon Broadcasting was a listed company and its stock price was significantly lower than the value of its prime assets, such as its affiliate Fuji TV, he launched his attack. Ultimately, Horie's attempt failed. However, in 2008, the Fuji Sankei Group used this as an opportunity to improve its governance structure by transitioning to a holding company system.

One should only go public if there is a compelling reason to do so, even after enduring the risks and costs associated with listing. It is even more unacceptable for a company to go public with the reckless attitude of raising funds first and deciding how to use them later, rather than determining the purpose in advance.

What is the reality in Korea? According to IMF statistics, last year the GDP of the United States was about $29 trillion, while Korea's was about $1.8 trillion. The number of listed companies was about 5,700 in the US and about 2,700 in Korea. Compared to the size of its economy, Korea has an excessively high number of listed companies. Over the past five years, the growth rate of listed companies by country was 17.7% for Korea, far surpassing Taiwan at 8.7%, Japan at 6.8%, and the US at 3.5%. The consequences of indiscriminate listings fall squarely on the shareholders. Moreover, the Korean market is not strict about delisting. From January to November last year, 192 companies were listed and 395 were delisted on NASDAQ. During the same period, 60 companies were listed and 19 were delisted on KOSDAQ. To those who wish to wear the crown of 'going public,' I ask: "Do you truly have the will and ability to bear its weight?"