Consider a fintech platform company (Company K) that posted operating profit of 88.5 billion won (on revenue of 308.9 billion won) last year and is expected to break 100 billion won in operating profit this year. How large would its market capitalization be on the KOSDAQ market? Given its high growth, with an operating margin and return on equity (ROE) approaching 30 percent, one might assume a price-to-earnings ratio (PER) of 20 to 30 times. Yet Company K's PER falls short of even half the fintech and software sector average (8 times).
Governance risk is seen as one factor behind this. The company's CEO, identified as C, became fixated on hanok (traditional Korean houses) and is building a hanok hotel in Yeongwol, Gangwon Province, at a cost of about 300 billion won. The field is unrelated to the company's business. Part of it has already been completed and is in operation. One night reportedly costs as much as 11 million won. CEO C says he intends to "achieve the globalization of traditional architecture," with plans to build hanok hotels in New York and Paris from next year onward. While some praise it as a "hanok Korean wave," many in the market voice concern that he is pouring company money into the project without any checks. Amid existing suspicions that CEO C does not want the stock price to rise until he completes the transfer of shares to his children, the situation has, to some degree, invited a crisis of trust.
In the case of Company R, regarded as a global first mover in long-term AI-based regeneration, its strong growth potential drove the share price up 14-fold from its offering price, only to recently fall by more than one-third. The company became a concentrated target of short sellers. One cited cause is that suspicions over the company's core technology, its prospects for global commercialization, and its push to list its U.S. subsidiary on Nasdaq spread indiscriminately without firm basis. The rumors spread while the company was unable to respond properly, bound by the Quiet Period ahead of its U.S. subsidiary's Nasdaq initial public offering (IPO), during which promotional remarks and information that could affect the offering price are restricted. The company's CEO, identified as Y, expressed his frustration, saying, "At a time when we are pouring all our energy into expanding partnerships globally and proving ourselves through results, we even have to worry about short selling."
Such cases illustrate well why KOSDAQ remains thoroughly sidelined, even as KOSPI enjoys a boom led by semiconductor stocks such as SK hynix and Samsung Electronics, followed by financial, automotive, shipbuilding, and defense stocks. Indeed, the KOSPI index is approaching 9,000, while the KOSDAQ index falls short of even 900. Compared with the KOSPI at 2,770 and the KOSDAQ at 740 on June 4 last year, the day President Lee Jae-myung took office, this shows how severe the polarization has become. Although President Lee pledged "KOSPI 5,000" and pursued stock market revitalization through commercial law reform and expanded dividends, the warmth has failed to reach KOSDAQ.
KOSDAQ is home to no small number of companies in AI, robotics, biotech, materials, parts and equipment, software, K-content, and aerospace. But amid continued neglect by institutions and foreign investors, it remains heavily dependent on individuals, making it difficult even for firms with strong technology to be properly valued. Add to this the not-infrequent cases like Company K, which erodes the market's reputation, and Company R, mired in a crisis of trust, and the reality is that a clever solution to revive the market is hard to find.
If KOSDAQ flounders in stagnation, the ventures and startups that drive growth cannot grow properly. If the ruling party, government, and presidential office seek a "money move" from real estate to the capital market and aim to ignite the engine of growth, they must seriously set "KOSDAQ 3,000" in motion. Conditions must be created for institutions such as pension funds and foreign investors to enter KOSDAQ. Only then can a "value-up" foundation be built, allowing ventures and startups to grow through the capital market and expand globally.
No matter how many unicorn and decacorn candidates capable of leaping to become global first movers there may be, these companies will struggle to fully blossom if the capital market ecosystem, including mergers and acquisitions (M&A) and KOSDAQ, remains barren. Could innovative companies that represent Nasdaq, such as Nvidia, Apple, Tesla, SpaceX, and Amazon, have grown properly had they done business in Korea, where venture capital is scarce, or listed on KOSDAQ, where discounts run deep? It is time to reflect thoroughly on the venture and startup ecosystem and KOSDAQ as a whole.
