Venture groups urge delay of Kosdaq tier system; warn stricter delisting rules and dual-listing ban could choke funding for innovative firms

Korea Venture Business Association Chairman Song Byung-jun speaks at a press briefing on capital market reform policy proposals held at Kensington Hotel in Yeouido, Seoul, on Monday. [Yonhap]
Korea Venture Business Association Chairman Song Byung-jun speaks at a press briefing on capital market reform policy proposals held at Kensington Hotel in Yeouido, Seoul, on Monday. [Yonhap]

South Korea's venture industry is calling for revisions to the Lee Jae-myung government's capital market overhaul, urging authorities to delay the planned introduction of a Kosdaq tiering system and carve out exemptions for venture firms from proposed dual-listing restrictions. Industry groups warn that tighter delisting standards and the dual-listing ban could squeeze funding for venture startups and erode the competitiveness of the country's broader innovation ecosystem.

The Korea Venture Business Association, the Korea Venture Capital Association and Korea Startup Forum held a press briefing Monday afternoon at Kensington Hotel in Yeouido, Seoul, under the theme "Reigniting the Heart of the Innovation Economy: Capital Markets."

Korea Venture Business Association Chairman Song Byung-jun said revitalizing Kosdaq had been "a long-standing challenge for the venture ecosystem that no administration has managed to solve over the past two decades." While expressing broad agreement with the direction of the capital market reforms, he said the proposed regime "reflects an excessively controlling and supervisory perspective rooted in traditional finance."

The venture industry particularly stressed that Kosdaq is not simply a stock trading market but a critical exit channel for venture investment and a growth infrastructure for innovative companies. As of the end of April, 1,274 of the 1,603 companies listed on Kosdaq — or 79.5 percent — had venture backgrounds, and those firms accounted for 81.1 percent of the market's total market cap. Among the 127 companies that gained listings through the technology special-listing track over the past four years, 114, or 89.8 percent, were venture firms. The figures underscore that Kosdaq's identity is fundamentally built on the venture sector.

Segment overhaul risks 'stigma effect'; dual-listing curbs seen chilling investment

The venture industry raised concerns about the Kosdaq segment restructuring currently under discussion. Financial authorities are pursuing a plan to divide listed companies into premium and general tiers to strengthen the market's competitiveness. Industry groups fear that firms placed in the lower tier would suffer a "stigma effect" that dries up their access to funding. Japan's Tokyo Stock Exchange faced similar criticism after a comparable restructuring deepened market polarization.

AI, biotech and deep tech companies in particular often post weak short-term earnings because of lengthy research and development cycles. If classification relies primarily on market cap or operating profit, these firms could be relegated to the lower tier regardless of their technological capabilities, effectively branding them as substandard.

The Japanese experience was cited as a cautionary tale. When the Tokyo Stock Exchange reorganized into Prime, Standard and Growth markets in 2022, trading activity concentrated in the top tier, widening the gap between segments. The venture industry warned Kosdaq could face the same side effects.

Chairman Song urged regulators to "assess the characteristics and potential of undervalued innovative companies from multiple angles and devise policies that can genuinely support them," calling on authorities to suspend the Kosdaq segment rollout and conduct a thorough review in consultation with the industry.

The groups also called for exemptions within the dual-listing restrictions. While regulators have been tightening rules on subsidiary listings, the venture industry argued that the practice is fundamentally different from the "split listings" used by large conglomerates — where a parent carves out a unit purely to raise cash — and the spin-offs or new business ventures pursued by startups.

Korea Startup Forum Chairman Kim Jae-won said dual-listing by conglomerates and subsidiary listings by startups "must be clearly distinguished," adding that while insolvent companies should be weeded out, "the funding channels for innovative firms must be protected."

A survey of venture companies reinforced the concern: 56.4 percent of respondents said a dual-listing ban would constrain their subsidiary growth strategies. Difficulties in attracting investment and achieving exits followed at 49.1 percent, limits on opportunities to raise corporate value at 45.5 percent, and reduced initial public offering opportunities at 34.5 percent.

The industry stressed that the cycle in which listed companies acquire promising startups, nurture them and eventually list them is a core virtuous loop of the venture ecosystem. Stricter dual-listing rules would make it harder for venture capital firms to exit investments, ultimately chilling early-stage funding as well.

In practice, semiconductor equipment company C was independently operated under a listed firm's investment structure but saw its listing review delayed due to dual-listing concerns. Game developer D halted its IPO process after controversy grew over its simultaneous listing alongside its parent company. The cases illustrate why the industry fears regulatory tightening could narrow the funding avenues available to innovative firms.

Korea Venture Business Association Chairman Song Byung-jun (center) speaks at a press briefing on capital market reform policy proposals held at Kensington Hotel in Yeouido, Seoul, on Monday. The Korea Venture Business Association, the Korea Venture Capital Association and Korea Startup Forum urged financial authorities to delay the introduction of the Kosdaq tiering system and establish exemption criteria for venture firms under the proposed dual-listing ban. [Yonhap]
Korea Venture Business Association Chairman Song Byung-jun (center) speaks at a press briefing on capital market reform policy proposals held at Kensington Hotel in Yeouido, Seoul, on Monday. The Korea Venture Business Association, the Korea Venture Capital Association and Korea Startup Forum urged financial authorities to delay the introduction of the Kosdaq tiering system and establish exemption criteria for venture firms under the proposed dual-listing ban. [Yonhap]

'20% of all Kosdaq firms at risk of delisting — a delay is needed'

Tighter delisting standards are another flashpoint. The Financial Services Commission is pursuing a plan to raise the market cap threshold for delisting on Kosdaq to 30 billion won (about $19.7 million) to improve market quality. Chairman Song said that under the rule set to take effect next year, "more than 300 companies fall below the 30-billion-won market cap threshold as of last week," adding that "20 percent of the entire Kosdaq market meets that criterion."

The industry proposed delaying the application of the 30-billion-won market cap standard, currently scheduled to take effect in 2027, and introducing a composite evaluation framework specifically for venture firms — one that weighs technology development outcomes and growth potential alongside market cap and share price.

Calls for reform of the technology special-listing regime also emerged. The system gives pre-revenue technology companies access to the capital market, but recent cases have prompted regulators to tighten scrutiny of business viability and sales, raising the burden on tech firms seeking to list. The venture industry urged authorities to narrow the gap in standards among evaluation agencies and establish sector-specific guidelines and standardized due diligence scopes to improve predictability.


boo@heraldcorp.com