KOSDAQ Technology Special Listings Return -36% vs Hong Kong +35%...Why the Gap?

"Korea Sees Large-Scale Investor Exits After Listing"

"Lack of Disclosures to Attract Foreign and Institutional Investors"

"Need for Funds to Support Companies Even After Listing"

There have been concerns that the distorted supply-demand structure, where institutional shares flood the market on the day of listing and retail investors are left to absorb the excess, triggers a sharp drop in share prices of KOSDAQ-listed companies under the technology special listing system. The absence of a “Scaling Up” ecosystem to support the growth of innovative companies, compounded by a cliff in venture fund support post-listing, further exacerbates the situation.

On the morning of the 10th, participants are taking a commemorative photo at the seminar titled "Why Can't Domestic Venture Capital Be Patient?" held at the National Assembly in Yeouido, Seoul. Photo by Seungwook Park

KOSDAQ Technology Special Listings See Negative Returns…Institutions Exit After Listing

Hanbin Lee, CEO of Seoul Robotics, said at the seminar titled "Why Is Domestic Venture Capital Unable to Be Patient?" held at the National Assembly in Yeouido, Seoul, on the morning of the 10th, "If you compare KOSDAQ’s technology special listing system with Hong Kong’s special tech listing (HKEX 18C), we have more companies taking this route, but in terms of capital raised and post-listing returns, Hong Kong is producing better results. When share prices rise after listing, people are motivated to invest, but in our case, share prices decline post-listing, so capital does not flow in.”

According to data from the Korea Exchange and HKEX 18C listings, since 2024, there have been 91 KOSDAQ technology special listings, with an average post-listing return of -36.8%. In contrast, there have been 24 Hong Kong technology special listings, with an average post-listing return of +34.5%.

The absence of anchor investor regulations, such as lock-up periods, has been highlighted as a core reason for weak performance. CEO Lee explained, “In Hong Kong, investors are subject to a 12-month lock-up, which obligates them to maintain their holdings, but on KOSDAQ, there are no such lock-up requirements, so prices drop on the first day of listing. If institutional lock-up periods are set at about 12 months, share prices would not decline in this way.”

He added, “When investors incur losses on the first day of listing, the Korea Exchange tightens its reviews, reducing the number of listings. This results in less inflow of institutional and global capital, carries valuations lower, and creates a vicious cycle of additional losses.”

The environment is also challenging for foreign investors. CEO Lee noted, “Unlike Korea, Hong Kong requires dual-language disclosures in English and Chinese, and as a result, significant capital flows in from China. On KOSDAQ, however, only retail investors' capital is coming in. Recently, even their enthusiasm has waned, leading to even lower returns. Making English and Chinese disclosures mandatory could help draw foreign interest.”

The counterparty responsible for assessing listing eligibility also differs. CEO Lee pointed out, “In Korea, entities such as technical evaluation agencies or the Korea Exchange, which do not assume risk, judge future value and decide listing qualifications. In Hong Kong, investors who hold at least 10% equity for over 12 months make the decision. Especially with technical evaluation agencies, there is a tendency to focus on sales, suggesting they may not independently understand the technology.”

Participants are engaged in a discussion at the seminar titled 'Why Can't Domestic Venture Capital Be Patient?' held at the National Assembly in Yeouido, Seoul on the morning of the 10th. Photo by Seungwook Park

However, the Korea Exchange explained that the entry requirements of the two markets are different. Ji-woo Choi, Executive Director of the KOSDAQ Market Division at the Korea Exchange, stated, “HKEX 18C targets companies with over 40 billion won in revenue, while in Korea, theoretically, companies can list even without any revenue. Hong Kong lists larger companies, so the funding size is bigger but the number of listings is inevitably lower.”

Post-Listing Fund Support 'Drops Off', Individuals Prop Up KOSDAQ

The seminar also addressed the supply-demand problem on KOSDAQ. Sung-hoon Jin, Head of Research Policy at the KOSDAQ Association, said, “The biggest issue is that 90% of KOSDAQ is structured around retail investors. Six months after listing, institutional holdings get released into the market, driving down prices, and it falls on individuals to absorb the supply.”

Ji-young Choi, CEO of Korea Startup Forum, also noted, “Institutions account for just 4.5% of KOSDAQ trading turnover, less than a third of KOSPI’s share, and the median foreign ownership on KOSDAQ is only 1.92%, much lower than the 4.70% seen on KOSPI. The lack of demand from institutions and foreigners has led even leading companies to transfer listings to KOSPI.”

There were views that a post-listing “Scaling Up” ecosystem needs to be established. Jisung Jung, CEO of SOS Lab, commented, “When companies are unlisted, multiple funding rounds such as pre-seed or seed are well-supported by funds, but post-listing, this support disappears. To ensure continued growth after listing, there need to be funds that institutionally support KOSDAQ-listed companies.”

Executive Director Choi explained, “From this November, to stabilize prices, we will introduce a cornerstone investor system that allocates more IPO shares to institutions willing to hold them for the long term. We are expanding English disclosures starting with large companies and moving towards making such disclosures mandatory on KOSDAQ.”

This content was produced with the assistance of AI translation services.