As financial authorities move faster to weed out insolvent corporations, regulations on corporations listed on KOSDAQ under the technology exception will also be significantly strengthened. From now on, if a technology-exception corporation adds or changes its business purpose within five years after listing (the exception period), it will be required to disclose it. If it is determined that the main business purpose has changed, it will immediately be subject to a substantive review of listing eligibility.
On the 10th, according to the Korea Exchange (KRX), the exchange said it plans to amend a partial revision to the KOSDAQ market disclosure rules.
The amendment includes a plan to strengthen listing management by imposing a disclosure obligation when a technology-exception corporation adds or changes its business purpose within five years after listing. The technology-exception listing system, introduced in 2005, has served as a gateway to help corporations with strong technology and growth potential raise funds even if their sales or profits are low. Alteogen and Rainbow Robotics, which rank among the top in KOSDAQ market capitalization, are representative success stories.
In addition, during the five-year exception period, they could receive benefits in being designated as issues under management. Ordinary KOSDAQ corporations are designated as issues under management if, in at least two of three years, annual sales are less than 3 billion won and the ratio of loss from continuing operations before corporate tax to equity exceeds 50%, but corporations listed under the technology exception are granted a grace period for these requirements. For corporations listed under the technology exception, the sales requirement is deferred for five years after listing, and the loss-before-tax requirement is deferred for three years.
Even corporations that enter the stock market on expectations of unrivaled technology and growth often suffer management difficulties because they fail to generate actual sales and profits. For this reason, some technology-exception corporations have sought a way out by adding new businesses or even changing their business purposes altogether when maintaining their core business becomes difficult.
In fact, of the 35 corporations listed under the technology exception last year, nine added or changed their business purposes.
ISTE, which engages in semiconductor manufacturing, added "wholesale and retail of computers and peripherals, and software" and "computer system integration consulting and implementation services" as business purposes. The reason is to enter the artificial intelligence (AI) data center market.
Aiji net, which operates an insurance service platform, also added as a business purpose "a holding company business that acquires and owns the shares or equity of subsidiaries to control their overall business, provide management guidance, reorganize, and foster them." Nara Space Technology, whose main business is manufacturing aircraft and spacecraft parts, also added "similar investment advisory services" and "equity participation and investment business" as business purposes.
A Korea Exchange official said, "Originally, adding or changing a business purpose is a matter resolved at a shareholders meeting, so it could only be confirmed indirectly through disclosures of the resolution to convene the meeting and the results," adding, "Under this amendment, for corporations listed under the technology exception, if they meet the relevant conditions, they will make an additional, overlapping disclosure."
Currently, the market requires immediate separate disclosure when serious reasons arise that shake a corporation's existence, such as allegations of embezzlement or breach of trust by executives or employees, and the intent is to view a change in the core business of a technology-exception company as an equivalent "fatal warning sign."
Meanwhile, this is a follow-up measure to the plan announced at the end of last year by the Financial Services Commission to enhance trust in the KOSDAQ market. At that time, to bolster trust in the KOSDAQ market, financial authorities had a rule that when a technology-exception-listed corporation changes its main business purpose during the five-year exception period, it is included as a reason for a substantive review of listing eligibility.