Dual-class share system needed for unicorns’ local IPOs: KRX chief

The head of South Korea’s sole stock bourse operator on Wednesday said that allowing a dual-class share system in the country would help more unicorns -- privately held startups valued at 1 trillion won ($884 million) or higher -- to consider listing in the local market.

“Both the country’s ruling and the main opposition parties have discussed matters related to adopting dual-class voting rights. If the government allows the system, we believe that it will likely attract (promising unicorn) firms’ initial public offering to the local stock market,” Korea Exchange Chairman Sohn Byung-doo said during a press conference held in Seoul.

While the dual-class share system is prohibited in the Korean market, Coupang’s recent IPO in the US market has rekindled debate over the necessity of dual-class shares in the country. Other startups including Market Kurly, Yanolja and Dunamu also appear to have set their eyes on stock market debuts abroad to pursue bigger investments on the global stage.

Sohn also said that the impact of short selling activities on the Korean bourse is not likely to cause major disruptions, citing previous cases of what had happened after resuming negative betting.

Short selling is a strategy of borrowing, selling and repurchasing stocks to return them to the lender.

He further highlighted that the bourse operator has strengthened its monitoring system and improved infrastructure to intercept those engaging in unfair stock trading in the early stages, and shortened its inspection for illegal short selling to one month from six months.

On retail investors’ criticism of the National Pension Service for selling massive domestic equities, Sohn said it is “not wise” to stick to fundamental principles considering the fast-changing market environment.

“I believe it might be better for (the pension fund) to operate its portfolio more flexibly if its principle or portion set for its equity investment does not fit into (the market condition of) today,” he said.

While the country’s main bourse Kospi surpassed the psychological threshold of 3,000 points for the first time this year, the NPS has been disposing of domestic equities to meet its midterm investment plan.

The chairman also pointed out that the rise in the number of retail investors has mainly pushed local stocks, which had also helped the main bourse to escape the “boxpi” trend, whereby the stock market fluctuates within a narrow band.

But when it comes to mitigating the “Korea discount,” a rise of transparency in management, stable corporate governance and sensitivity to environmental, social and governance issues are important factors, he said.
 
Regarding the bourse operator’s long-awaited IPO, the chairman said the decision will be made through thorough communication with interested parties in the mid to long term.

By Jie Ye-eun (yeeun@heraldcorp.com)