This year, the designated management items have reached a 'revenue test.' More than half of the corporations failed to meet the annual revenue requirements, and whether they will be designated as management items will depend on their performance in the second half of the year. Some corporations have sought a breakthrough by pursuing new businesses unrelated to their core operations.
According to the Financial Supervisory Service's electronic disclosure system (Dart) on the 5th, out of the 22 corporations that were listed under special technology from October 2019 to September 2020, 12 had first-half revenues below 3 billion won. Seven corporations were reported to have revenues below 1.5 billion won in the first half.
All of them must achieve an annual revenue of 3 billion won this year. Special technology-listed corporations are exempt from revenue requirements for five years after listing, and until last year, they could maintain their listing even if their revenues were 'zero (0),' but the exemption ends this year.
According to KOSDAQ listing regulations, corporations with annual revenues below 3 billion won are designated as management items. If revenues fall short for two consecutive years, it will lead to grounds for delisting. The designation as management items signals that there are issues with the financial soundness of corporations, which can trigger a ban on transactions and decreased trading volumes, leading to significant concerns about falling stock prices. It is essentially considered a preliminary step to delisting.
Among the 22 corporations, the one with the smallest revenue is Parataxis Korea (formerly Bridge Biotherapeutics). Its revenue for the first half of this year is about 9 million won, meaning it must generate over 2.9 billion won in the second half to meet the revenue requirement. However, it is designated as an 'innovative pharmaceutical company' and is granted another exemption from the revenue requirement until early next year. This corporation is already designated as a management item for failing to meet the legal impairment criteria (exemption for three years).
The legal impairment criteria refer to being designated as a management item when the ratio of 'continuing business losses before deducting corporate tax expenses (legal impairment)' exceeds 50% of capital more than twice in the recent three years. Special technology-listed corporations receive an exemption from this requirement for three years, and the 22 corporations listed from October 2019 to September 2020 are already subject to this requirement from 2023.
Kainos Medicine, which develops anti-cancer drugs, is also on the verge of delisting. Its revenue for the first half of this year is only about 500 million won. According to exchange regulations, listed corporations with semi-annual revenues below 700 million won are subject to delisting reviews. Aside from the annual revenue requirement of 3 billion won for maintaining listing, it has also fallen short of the semi-annual revenue requirement.
Some listed corporations have sought breakthroughs by entering new businesses to avoid designation as management items. MedPacto, which develops immune anticancer agents, had no revenue for the past five years but ventured into the distribution business unrelated to its existing operations this year, securing 600 million won in revenue in the first half. Vaxcellbio, which develops immune anticancer treatments, also had no revenue from its cancer drug sector but entered into distribution businesses such as pet healthcare and medical supplies, raising its first-half revenue to 3.7 billion won.
However, reactions from the industry are mixed. An official from one corporation listed under special technology remarked, 'The bio and pharmaceutical business takes years of research and development, making it practically impossible to generate revenue within five years. Ultimately, to survive, we have no choice but to pursue businesses unrelated to our original operations.'
On the other hand, an official from the securities industry noted, 'Investment decisions are primarily made based on core business operations, but if a corporation expands ancillary businesses for short-term revenue, it may diminish its intrinsic investment appeal,' adding, 'This essentially misuses the intent of the special technology listing.'
The revenue concerns of the special technology-listed corporations are expected to grow. This is because the KOSDAQ listing requirement, previously set at 3 billion won, is expected to be significantly strengthened. It is estimated that more companies will find it challenging to meet the enhanced requirements by relying solely on ancillary businesses.
Earlier, the financial authorities announced in January this year a plan to improve the 'IPO and delisting system,' aiming to gradually strengthen the listing maintenance requirements. The revenue requirements for KOSDAQ market will be adjusted upward to 5 billion won in 2027, 7.5 billion won in 2028, and 10 billion won in 2029 for companies with a market capitalization of less than 60 billion won.