Last year, when 6 corporations newly listed on the KONEX market, more than double that number, 14 corporations were delisted. The problem lies in the reasons for delisting. Rather than healthy reasons like transferring to KOSDAQ, many corporations failed to secure designated advisors or received 'disqualified' audit opinions.
KONEX corporations must be managed by designated advisors (securities firms), but given the poor situation of KONEX corporations, securities firms are also skeptical about the designated advisor business.
According to the Korea Exchange on the 7th, as of the end of last year, there were 121 listed companies on KONEX, a decrease of 8 from the previous year (129). Six corporations including Sevenbrau, AMCG, TAJOYENT, and PangSky entered the market, but 14 including EV Parking Service and Cellgentek were delisted.
Only 4 corporations, including DuChemBio, HANJUNG NCS, DAWON NEXVIEW, and H&S High Tech, had delisting reasons that aligned with KONEX goals, such as SPAC mergers or transfers to KOSDAQ. SKC and Golfzon Deca left the market for reasons of incorporation into subsidiaries of other companies or absorption mergers.
Among the remaining 8, five companies including CNT Dream, DP Co, Bern, Gem, and Pino Tech were expelled from the market due to the 'disqualified' opinions of auditors. The cosmetics manufacturer CNT Dream was delisted after receiving audit opinion rejections for two consecutive years, roughly 4 years after its listing in December 2020, due to continued poor performance and a total capital that was negative (–) 6.6 billion won, leading to a complete capital impairment. The primary reason for the electric vehicle manufacturer DP Co was a complete capital impairment.
EV Parking Service, Cellgentek, and SM VINA experienced delisting because they failed to secure new advisors within 30 days after terminating existing designated advisor contracts. A designated advisor refers to a securities firm that conducts listing reviews and advisory services while relaxing the listing requirements.
The main reason for not appointing a designated advisor is poor performance. Last year, among the 103 KONEX listed companies analyzed by the exchange, 66 corporations, accounting for 65%, reported net losses. Of them, 50 could not escape from losses for two consecutive years. The fashion brand OEM corporation SM VINA exited the market after failing to reappoint an advisor following termination of the contract due to an operating loss in 2021.
In July 2023, the electric vehicle charger company EV Parking Service, which was listed on KONEX, generated a delisting reason after receiving an audit opinion rejection just 8 months after its listing. Subsequent attempts to find a solution were hampered by frequent revised disclosures, resulting in accumulated penalties. This company was designated as an irresponsible disclosure corporation, leading to termination of the designated advisor contract and failure to find a new advisor, ultimately resulting in delisting.
There is also owner risk. In the case of the healthcare corporation Cellgentek, one of the co-CEOs was revealed to have embezzled 24 billion won last July, leading to termination of their contract with designated advisor BNK Investment & Securities and failure to secure additional advisors, resulting in their exit from the market. Typically, the securities firm serving as a designated advisor includes conditions in the contract specifying that if the contracting corporation has conditions for delisting, they may request termination of the advisory contract.
Given the current situation, securities firms are skeptical about selecting designated advisors. Since the advisory fee income is not large, they must invest expecting future KOSDAQ listing possibilities, but finding such corporations is difficult. More securities firms are increasingly deciding to deploy IPO personnel elsewhere. Currently, only a few small and medium-sized securities firms, including IBK Securities, are participating in the designated advisor business.
A representative of a securities firm that is reducing its designated advisor business noted, "With the IPO personnel already in short supply, designated advisors have many tasks relative to profitability and involve significant risks," and added, "When signing advisory contracts, we assess the likelihood of a KOSDAQ listing ourselves, but most corporations do not match, leading to many instances where contracts fall through."