The biggest initial public offerings in the global market this year have been SpaceX, ChangXin Memory Technologies and Unitree. SpaceX, which listed on the Nasdaq in June, absorbed global liquidity like a black hole. CXMT and Unitree debuted side by side on the STAR Market of the Shanghai Stock Exchange, often called China's Nasdaq. CXMT, China's largest DRAM maker, became the most valuable company on the mainland market on its first day of trading, while Unitree, the top humanoid robot maker, drew attention as its shares soared 460% above the offering price on debut. China is nurturing companies in artificial intelligence, semiconductors, robotics and quantum technology at the national level, and it also supports large-scale fundraising. Once listed, those companies serve as engines that drive the stock market.
On the KOSDAQ, by contrast, it is hard to find a prospect that generates any buzz. Since the market opened in 1996, the only IPO to raise more than 1 trillion won was Celltrion Healthcare in 2017, at 1.0088 trillion won. Offerings of 100 billion won or more number just one or two a year. K-unicorns valued at more than $1 billion, such as Yanolja and Toss operator Viva Republica, are knocking on the Nasdaq's door in search of higher valuations. Galaxy Corporation, an AI entertainment technology company hoping for a valuation in the trillions of won, is also pursuing a U.S. listing. Musinsa, which operates a fashion platform, did choose the Korean market, but it went to the main KOSPI board. Companies with a reasonably assured valuation show a strong tendency to avoid at least the KOSDAQ, with an eye on smooth fundraising and boosting their corporate value.
A market bustles when it has plenty of goods that sell well. The limits of relying on already-listed secondary battery and biotech companies are clear. So what if K-unicorns were sent to the KOSDAQ, even if it takes a degree of compulsion? The Korea Exchange currently steers companies toward either the KOSPI or the KOSDAQ through informal guidance during listing consultations. Compelling every company is impossible, but companies that have received policy funds could be directed to the KOSDAQ through guidelines. The National Growth Fund, created to nurture innovative companies, invested this year in Rebellions, Upstage, FuriosaAI, LigaChem Biosciences and Wonik Robotics. If core companies in these next-generation growth industries became the KOSDAQ's flagship names, the market would be far more vibrant than it is now. Park Hyeon-joo, chairman of Mirae Asset Group, has proposed offering clear incentives such as corporate tax cuts or separate taxation for major shareholders, while barring a move to the KOSPI for at least five years. Growing the market through a trickle-down effect, he argues, is itself a way to nurture venture businesses.
If reforms such as a KOSDAQ promotion-and-relegation system and the removal of zombie companies proceed alongside this, the market's fundamentals could improve. In April 2022, the Tokyo Stock Exchange reorganized its five markets into three — Prime, Standard and Growth — and made delisting mandatory for companies that fail to meet listing requirements. That led to higher corporate values on the Prime market and an inflow of foreign money.
Financial authorities are also pushing to introduce a promotion-and-relegation system for the KOSDAQ, but the industry is pushing back hard. The concern is that dividing companies by size or short-term earnings effectively stamps them as a "second division." Lee So-young, the nominee for minister of SMEs and startups, said uniform classification based on market capitalization and earnings could create a hierarchy among companies and a stigma effect. With the government having delayed for six months its plan to raise the market-cap threshold for delisting, citing the market slump, there is concern that the will to reform may be backsliding.
Investors are increasingly turning away from the KOSDAQ. Its share of total market capitalization on domestic exchanges stands at just about 7%, similar to the level of 30 years ago. Daily trading value came to 7.1961 trillion won as of the 18th, less than half the daily average in January this year. The index topped the 1,200 line in the first half of the year but is now barely holding the 800 line. As the market shrinks, IPO jackpots have become rare, and shares frequently trade below their offering prices. That ultimately feeds a vicious cycle of insufficient supply and demand. To shed its reputation as a minor league, the KOSDAQ first needs promising companies worth trillions of won. If promising companies list on the KOSDAQ and their shares climb, one hopes a virtuous cycle will follow, with other innovative venture companies going public in their wake.
