South Korea’s Financial Services Commission (FSC) announced Wednesday a series of reforms aimed at boosting shareholder value and revitalizing the Kosdaq market. Key initiatives include a ban on “split listings” by conglomerates and the creation of a tiered Kosdaq market system.
The FSC’s primary focus is eliminating duplicate listings, a practice where core business divisions are spun off and listed separately. This practice, common among large Korean business groups, has been identified as a significant contributor to the “Korea Discount,” the phenomenon of Korean companies being undervalued compared to their global peers.
The regulator believes these listing practices negatively impact shareholder value and, as such, will generally prohibit them.
Financial authorities expect this measure to improve the overall market capitalization of companies.
The 2022 market debut of LG Energy Solution, a major battery manufacturer, sparked considerable debate surrounding the split listing practice.
LG Energy Solution was spun off from LG Chem, a leading chemical company, to capitalize on the burgeoning electric vehicle market. This separation led to a prolonged slump in LG Chem’s stock value.
The FSC also stated its intention to encourage listed companies with low price-to-book ratios (PBR) to enhance their corporate value through various methods, including a system of public acknowledgement and potential scrutiny for underperforming companies.
Further, the regulator will segment the Kosdaq market into two tiers: a “premium” market for established, larger companies and a “standard” market for promising, growth-oriented businesses.
The FSC also plans to develop a new stock index specifically for the premium market companies and introduce related exchange-traded funds (ETFs) to increase investment and visibility.
