ShillaJen fiasco raises bar for bio firms' IPOs

SillaJen shareholders protest in front of the Korea Exchange (KRX) on Yeouido, Seoul, Jan. 18. Newsis

By Anna J. Park

The country’s bourse operator Korea Exchange (KRX) is set to raise the bar for tech-heavy startups aiming to go public through the KRX’s special listing track for the Kosdaq market.

According to the KRX, the bourse operator already started the process early this year, in the face of a series of fiascos of its Kosdaq-listed bio firms, including the sudden trading suspension of Osstem Implant due to the embezzlement of some 188 billion won ($157 million), as well as a heightened chance of SillaJen being delisted from the Kosdaq market.

The KRX’s corporate review committee decided to delist SillaJen in mid-January. Yet the decision could still be overturned at the bourse operator’s Kosdaq market committee, which will release its review results by the end of next week. In the best-case scenario, the committee could give SillaJen another chance to improve its financial condition to avoid delisting for another year, although the bio firm is certainly one step closer to its potential delisting.

Amid the series of recent mishaps, the KRX is currently working on developing a so-called “standard technology examination model,” which will be used as a new guideline for assessing a company’s corporate capabilities as part of the requirements for the KRX’s special listing track designed for tech-heavy startups.

The KRX introduced the special listing track in 2015 in order to lower the bar for startups with a particularly strong technological base. Through the listing track, companies with operating losses were given easier access to Kosdaq listing.

It turned out that companies in the bio sector have benefited the most from the special track. Of the total of 143 companies going that route, 93 companies ― or 65 percent ― were bio startups. The capital raised by the bio companies’ IPOs through the six years stands at around 2.6 trillion won, which is almost triple the capital raised by companies of other sectors.

While there have been a few successes, such as LegoChem Biosciences and Alteogen, a failure like SillaJen has urged the KRX to come up with a measure to strengthen the special listing track process to minimize risk to minority shareholders. SillaJen also made its stock market debut in 2016 through the special listing track allowed for tech-heavy startups. It has been suspended from stock trading for nearly two years now since May 2020.

An association of SillaJen shareholders argues that the bourse operator holds a grave responsibility in the current fiasco, as the KRX’s hasty assessment of the biopharmaceutical company during the evaluation process for its IPO failed to curb the problematic company from being listed.

Through establishing the new evaluation model, the KRX aims to raise the bar for any potential IPOs by tech-focused startups, aiming to secure more stable operation for to-be listed companies on the stock market.