The article that I was concerned about came out

Only founders and VC make money and mass-produce “deficit” zombie companies
https://biz.chosun.com/stock/stock_general/2024/04/08/BMRSZTD2MBDU5GQHPZ4P6TZA6Q/

Unfortunately, the limitations of articles that do not take into account the characteristics of bio-companies are unfortunate, but the internal pladers of the bio-ecosystem must also accept that the external environment facing the ecosystem is like this and start discussing it. There are three things I want to point out, but I think I need to write a longer article on this.

1. A diagnosis is needed considering the characteristics of the industry.

• Bio companies, which account for the majority of technology special listings, should not be evaluated by the same standards as general manufacturing companies.
• Nasdaq bio companies have an average deficit period of about seven years after IPOs (the second figure below is the Gilead case, which has been in the red for more than a decade)

1. Organizational and institutional means for risk distribution of bio are needed.

• There is a limit for individual companies to be the subject of risk distribution. This is because start-ups with multiple candidate materials are very rare.
• Since VCs investing in multiple companies can be the subject of risk distribution, it is necessary to improve the system so that the portfolio can be managed from a VC perspective.

1. Nevertheless, institutional and organizational improvements are needed to support the investment needs of ordinary investors.

• There is a need for more devices that can alleviate information asymmetry in bio.
• More means are needed to guide the investment of ordinary investors.

====== Knight ==========

Is the special technology listing system introduced in 2005 to find innovative companies that have growth potential and technology but cannot make profits right now? It has been almost 20 years since its introduction, but there are few successful cases among companies listed as special technology. 96% of companies have not achieved the performance targets presented at the time of listing, and 3 out of 4 companies are currently priced below the public offering price. 81% of special technology companies are facing a deficit. Nevertheless, he pointed out the problem of the special technology listing system, which is criticized for only mass-producing ‘zombie companies’ by delaying the exit.

The technology special listing is becoming like “a league of their own.” Start-up founders can join hands with some venture capitalists and listed organizers to join hands and join the ranks of the rich with tens of billions of won overnight if they cross the threshold of technology specialization.

Contrary to the purpose of the technology special listing system, which is designed to raise more companies with seed money raised through public offerings, listing is often the final goal. When setting corporate value, 95.9% (70 out of 73 companies) that offered estimated net profit for the past three years (2021-2023) failed to meet their target.

81.2% of companies listed on special technology (excluding 155 companies and non-submitted companies) posted net losses last year. Looking at the KOSDAQ market as a whole last year, the proportion of companies in the red was 41.7%, which is steadily increasing from the 30% level in 2019. It coincides with the time since 2018, when the number of companies listed on special technology surged. This is why some point out that the quality of the overall KOSDAQ market is deteriorating.

Why is there not much criticism among investors despite the situation that is undermining the value of the KOSDAQ market? This is because many companies with special technology are listed with a market capitalization of around 100 billion won, and their stock prices often rise on the first day of listing. Of a total of 212 companies listed with special technology, 75% (159) had a market capitalization of less than 200 billion won. It is advantageous to maintain the current situation from the perspective of investors of public offering stocks as well as founders, VC, and securities companies.

Of course, there are many cases where the stock price’s upward trend is dampened due to corporate performance not being supported. As of this month, three out of four companies listed on special technology have their stock prices below the public offering price (based on revised stock prices).

An official from the capital market pointed out, “Since special technology companies are small in size and the stock price trend is good at the beginning of the listing, experts who conduct pre-listed evaluations feel less responsible.” “With the mind of ‘It’s worth 100 billion won’, if there is a record (record) that received investment from a large venture capital (VC) or a case of cooperation with a major conglomerate, we will examine it with confidence,” he said.

If the threshold for special technology listing is not exceeded, many companies are immediately going to the stage of rehabilitation procedures (court management). In particular, in recent years, as the venture market has frozen, it is rare for a company that fails to list to raise funds from VC again. Due to financial difficulties, they are forced to choose the rehabilitation procedure. Urban Base, which once had an enterprise value of 400 billion won after receiving investments from Samsung, Hanwha, and Shinsegae, is undergoing rehabilitation procedures after failing to list its technology special case. Likewise, bio-venture KuGen Biotech began its rehabilitation procedure after its listing failed.

An official from the financial investment industry said, “If the technology evaluation had been more sophisticated than now, some of the owners who are now listed and become tens of billions of dollars would have been in bankruptcy proceedings from the court,” adding, “As companies that are not eligible to be listed remain on the stock market, they are losing investors and hurting the market’s soundness.”

Policies often focused on fostering special technology-listed companies rather than distinguishing between the good and bad. When the growth evaluation was introduced for the special technology listing in 2016, the number of institutional investors who could participate in the process of predicting demand for the entire public offering market was expanded to investment advisors, and as a result, the institution was scattered, leading to overheating of the public offering. There is only one case of delisting companies, and the impact of the government’s continued easing or delaying the delisting requirements from 2018 cannot be ignored.

Financial authorities are also aware of the problem. When announcing 14 tasks to improve the special technology listing system in July last year, it was most difficult to protect individual investors while giving opportunities to blue-chip companies.