The new guidelines will allow businesses with at least 50 billion won ($42.7 million) in market capitalization, previous annual sales of 3 billion won and above, and showing 20 percent growth in sales over the past two years to be listed on KOSDAQ. (image: KobizMedia/ Korea Bizwire)
SEOUL, Dec. 14 (Korea Bizwire) – Korea Exchange (KRX) trading board KOSDAQ announced Wednesday that it would start allowing businesses operating in the red to go public if they show positive growth potential – introducing a so-called the “Tesla condition” taken from Tesla Motors, which lacked capital initially but was recognized for its prospects, and successfully went public on the NASDAQ in 2010.
Prior to the revision, which will take effect on January 1, companies that had yet to turn a profit were not acknowledged as viable candidates for IPO applications.
However, the new guidelines will allow businesses with at least 50 billion won ($42.7 million) in market capitalization, previous annual sales of 3 billion won and above, and showing 20 percent growth in sales over the past two years to be listed on KOSDAQ.
Nonetheless, in order to protect investors, a three-month grace period (from the day of the IPO) will be imposed for investors to file redemption claims.
Furthermore, taking into consideration that these companies are struggling to make profits, the existing (select) conditions for delisting or “special monitoring” will not be applied for the five-year period following the initial public offering.
The new conditions will be equally applied to overseas companies, officials said, but with higher levels of responsibilities imposed on major shareholders, brokers, and the respective accounting firms.
“The revision will allow businesses with high potential to make a new leap forward using the capital market system,” said a KRX official. “KOSDAQ will again strengthen its role as the major financing body for local and foreign businesses with great potential.”
In a similar effort in October, the Tesla condition was also applied to promising startup firms that meet certain qualifications to IPO with KOSDAQ.
By Kevin Lee (kevinlee@koreabizwire.com)
