Korea Exchange’s IPO review delayed amid surge in applications

[Graphics by Song Ji-yoon]

South Korea is seeing significant delays in the initial public offering (IPO) review process amid a sharp surge in the number of applications over the past two months.

According to the Korea Exchange on Wednesday, there were 33 preliminary listing review applications in April and 21 in May. This marks the highest level since November 2023, when the controversial IPO of fabless semiconductor company Fadu emerged.

Fadu’s stock plummeted as its first earnings report fell short of market expectations right after its Kosdaq debut in August 2022.

This year, robust stock performance among new listed companies and successful listings of major entities like HD Hyundai Marine Solution and APR have spurred more firms to seek listings on both the Kospi and Kosdaq.

Recent applications span diverse industries, including robot edutech firm Alux, adult education company Day 1, insurtech firm iGinet, and biopharma materials company Nexel.

However, the review process is struggling to keep pace with the influx of applications.

In April and May, only 18 and 10 companies, respectively, received their review results, about half of the new applications submitted.

This contrasts with the period from December 2022 to March 2023, when the number of monthly review completions exceeded new submissions.

The Korea Exchange’s regulations stipulate a 45-business-day period for preliminary listing reviews. As of Wednesday, companies that applied by mid-March should have received their results.

However, this timeline is not legally binding, leading to delays for reasons such as supplemental paperwork. Currently, there are 76 pending preliminary reviews, with 22 exceeding the 45-business-day mark.

Companies experiencing prolonged review times include mobile software firm Uracle, enzyme producer Enzynomics, and drug developer Future Medicine. Despite lengthy reviews, approval is not guaranteed.

For instance, NOV Metapharma, which sought Kosdaq listing via a SPAC merger, endured a 10-month review only to be denied approval on May 27.

Industry insiders express frustration, saying that companies focusing heavily on IPO preparations at the expense of business expansion can find the delays particularly draining.

Uncertainty over investment returns can also disrupt financial planning for investors.

Previously, listing reviews primarily focused on quantitative factors such as financial performance.

Recently, various special exemption provisions allowing for listings based on technological and growth potential have lengthened the review process.

“The increased number of preliminary listing review applications from early-stage IPO companies is causing longer review times,” said an official at the Korea Exchange.

Some speculate that the Korea Exchange has adopted stricter review standards after the Fadu controversy.