Korean IPOs delayed after bourse's sweeping reshuffle

Scores of South Korean initial public offerings slated for the first half of this year have been delayed after the bourse operator carried out a large-scale reshuffle of staff, according to industry sources.

The delayed process coincided with the war in Ukraine and soured investor sentiment on new share offerings, resulting in a string of IPO cancellations. 

In January of this year, Korea Exchange (KRX) replaced more than 80% of employees in charge of reviewing IPO applications for both of the main bourse Kospi and the junior Kosdaq market.  

Among the replacements are heads of the IPO examination divisions of Kospi and Kosdaq. For the Kosdaq market listing division, six of seven members have been replaced so far this year.

"The Kosdaq market has various listing requirements tailored to technology startups, bio companies and those yet to make a profit, so their IPO examination requires experience and knowledge about those sectors," said an investment banking industry official.

"Replacing people in the IPO examination team means they go through the examination process from scratch again."

The review of an IPO application usually takes 45 working days. But recently, it took more than three months for several cases.

For Tailim Paper Co., a corrugated cardboard maker and Daemyoung Energy Co., a renewable energy company, their IPOs took 76 days and 71 days each to receive approval from the Korea Exchange.

QUEUING UP

Currently, a total of 41 IPO candidates are awaiting a go-ahead from the KRX, according to the bourse operator on March 16. Of the total, 25 companies applied for a review of their stock market listing in the fourth quarter of last year.

Among them, five companies are planning to go public on the main bourse, including SK Shieldus Co., a security service provider a majority owned by SK Telecom Co. and Socar Inc., a car-sharing startup.

The country's No. 2 life insurer Kyobo Life Insurance Co. and Hyundai Oilbank Co. under Hyundai Heavy Industries Holdings Co. also are lining up for the Kospi market debut, along with One Store, an app distribution channel like Google Play Store.

On the junior Kosdaq market, 36 companies have applied for IPOs. Among them are Bumhan Fuel Cell Co., a hydrogen fuel cell maker; SungEel HiTech Co., a lithium-ion battery recycling company; and Lunit Co., a medical software developer.

The KRX was supposed to clear the IPOs of Bumhan Fuel Cell and D&D Pharmatech Inc., a dementia treatment developer, by January or February of this year. But both companies have not yet received the go-ahead.

IPO WITHDRAWALS

Further, stricter requirements for bio companies' IPOs led a number of biotech ventures to abandon their listing plans.

After SillaJen Inc.'s top management was indicted on charges of embezzlement and breach of trust in 2020, the KRX raised IPO barriers for biotech startups.

Future Medicine, FineMedix and Korea Medicine Research Institute and Voronoi Inc recently scrapped their IPO plans, following in the footsteps of Hyundai Engineering Co. and Daemyoung Energy Co.

"KRX has not yet cleared IPOs of bio companies, each of which has an enterprise value of multi-hundred billion won," said a bio industry source.

"Among them are D&D Pharmatech, AI-based cancer diagnostic company Lunit and a drug developer AprilBio. They are nervous about delayed fundraising from IPOs."

Over the past few months, a bulk of IPOs approved by the KRX were those with a simple business structure such as special purpose acquisition companies and real estate investment trust companies.

Materials, components and apparatus manufacturers with strong financial conditions also suffered no delays in their listing process, according to the sources.

"Many of KRX's IPO employees have little knowledge about the relevant industries," said another venture capital industry source.

"The exchange's regular personnel reshuffle conducted every two years makes it difficult for them to build expertise."

Write to Ye-Jin Jun at ace@hankyung.com
Yeonhee Kim edited this article