[Opinion] The KOSDAQ Jungle

Bae Yong-jun, the actor also known as “Yon-sama,” emerged as a rich man in KOSDAQ, attracting attention from the stock markets. By investing nine billion won in Ottowintech (currently Key East), whose entire amount of assets had been in an impaired capital situation but whose capital increased on March 22, he obtained a 37.5 percent stake in the company and gained profits of about 70 billion won in one month. However, he cannot have the profit in his hands right away because he extended the mandatory period of not selling stocks (grace period) from one year to two years.

When the price of Key East shares rose even amid controversy over the “typical backdoor listing,” analysts were dumbfounded. “How does the stock price rise just because a movie star has become a large shareholder?” “There isn’t any feasibility assessment about the company yet.” Even the company’s president said, “I feel burdened because the stock price soared too much.” Being at a crisis of delisting because of its sluggish sales, Ottowintech survived by posting 2.8 billion won in sales on December 30 and 31 last year; the day before and the day of closing the books. Some raise suspicions that the sales did not conform to the accounting standard.

It is said that if a new registration standard is applied to 831 companies among 926 companies listed in KOSDAQ, which closes its books in December, 402 companies would not meet the registration standard. However, only four companies were delisted from KOSDAQ for sluggish sales and impaired capital this year. The figure is much smaller than the 40 companies that were delisted in 2004 and 2005. Irregularity is neither good for the market nor for investors. Disqualified companies should be kicked out, to open the KOSDAQ market to venture firms.

KOSDAQ represents an individual investors’ investment destination. Individuals account for 90 percent of KOSDAQ’s investors. They do not know well about companies they invest in. The “blind investment” still prevails, which allows speculators to survive in the market. When a problem comes up, it is hard for individual investors to regain their investment, even if they gather to pursue a lawsuit. Worse yet, companies in KOSDAQ are generally not interested in IR. They just say, “We have no person in charge, no budget and no experience.” Securities companies publicize analysis reports on excellent companies, but that is not nearly sufficient. Individual investors are investing their money in this “jungle.”

Hong Kwon-hee, Editorial Writer, konihong@donga.com