"Growth Stifled on KOSDAQ"... Calls for Reform of Exit Market System

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"There is a tenfold difference in company valuation. Why would anyone choose to list on KOSDAQ?"

On July 3, Choi Younggeun, a professor of business administration at Sangmyung University, made this statement at the "Innovation Forum for Revitalizing the Venture and Startup Investment Market" held at the National Assembly in Yeouido, Seoul, pointing out the lack of appeal of the Korean KOSDAQ as an exit market. He added, "The reason why advanced global venture companies head to NASDAQ is that there is a bullish market environment where they can receive high valuations."

The forum was organized by the Korea Venture Business Association and the National Assembly startup research group Unicorn Farm to address the limitations of the listing system and capital-raising structure that hinder the growth of ventures and startups, and to discuss effective institutional improvements. Attendees included National Assembly members such as Kim Hankyu, the representative of Unicorn Farm, as well as Jang Cheolmin, Lee Haemin, Lee Jaegwan, and Han Jia.

On the 3rd, attendees are taking a commemorative photo at the "Innovation Forum for Revitalizing the Venture and Startup Investment Market" held at the National Assembly in Yeouido, Seoul. Photo by Lee Sungmin

At the event, participants shared their suggestions regarding the crisis and alternatives for the KOSDAQ market, which is a core pillar of Korea's venture ecosystem. They reached a consensus that for the government-backed Mother Fund and private venture capital (VC) investment systems to function properly, the exit market must operate effectively.

Professor Choi Younggeun explained, "Among the three core elements of the venture investment ecosystem?venture companies, VCs, and the exit market?the most important is the exit market." He added, "Only when investors can recover their investments at high valuations will large amounts of capital flow in and the ecosystem be revitalized."

He suggested measures to revitalize the KOSDAQ market, including: restructuring the KOSDAQ market's governance and introducing a responsible listing system through more active entry and exit; and promoting KOSDAQ trading centered on institutional investors by establishing public offering funds.

Lee Seokhoon, a research fellow at the Korea Capital Market Institute, who gave a presentation on "Institutional Improvement Measures Centered on Technology Special Listing," emphasized, "The substantial achievements of companies listed through the technology special listing system generally begin five years after listing, not immediately after." He stressed, "The evaluation system should be designed based on long-term growth potential centered on intangible assets and technological capabilities, rather than short-term financial performance."

Research fellow Lee added, "It is difficult to disclose information on intangible assets, and institutional shortcomings make it hard to secure investor trust." He proposed, "It should be mandatory to qualitatively disclose business models, growth strategies, and R&D plans, and the market structure should be guided toward institutional investors." He further stated, "To resolve the information asymmetry that individual investors cannot handle, it is urgent to restore market trust by strengthening disclosure, similar to Japan's Growth Market."

During the subsequent discussion, various industry stakeholders exchanged opinions on the direction of institutional improvement and policy tasks to revitalize the exit market.

An Sangjun, CEO of Kolon Investment, emphasized, "VCs are familiar with everything from a company's early growth to its technological DNA, but after an IPO, they are excluded from the market." He stressed, "Continuous participation of VCs in both the public offering market and the exit market must be institutionally guaranteed." He added, "If there are too many restrictions on exits, private capital will ultimately be tied up, and the government's policy fund recovery will be delayed, blocking a virtuous cycle."

Hwang Sukyung, CEO of AstroZen, said, "Currently, the technology evaluation system is often heavily influenced by the subjective judgment of the reviewers." She added, "Especially in highly specialized fields such as new drug development, the system needs to be revised so that experts with a deep understanding of the industry can participate in the evaluation."

Jung Yushin, a professor at Sogang University who chaired the forum, stated, "Our IPO market is excessively focused on listing reviews, and there are almost no flexible exit routes such as post-listing M&A or follow-on investments." He suggested, "To enable companies to secure various growth paths connected to the market even after listing, the M&A market should be revitalized, and incentives should be provided to encourage institution-centered funds to participate in the public offering market."