Tech Ventures Doing Poorly in U.S. Stock Markets

Several Korean tech start-ups that were listed on the U.S. NASDAQ have been forced to leave the market.

According to the Korea Exchange and Korea Securities Depository, Mirae Corp., Webzen, Gmarket, Gravity and Pixel Plus remain listed on NASDAQ, while Hanaro Telecom, Thrunet, eMachines and Widerthan have been forced to leave.

NASDAQ rules require delisting for companies whose shares costs less than one dollar each; whose free-floating shares are less than 500,000 shares; whose market capitalization of free-floating shares are under one million dollars; and whose number of shareholders with more than 100 shares is smaller than 300 for more than 30 straight days.

A Hanaro source said, “Hanaro Telecom shares were removed from NASDAQ in June last year. At the time, only thousands of shares were traded per day. For sure, our listing meant nothing at all.”

Hanaro spent a whopping one billion won a year to subscribe to a U.S. insurance company and produce a public announcement in English with the help of lawyers and accountants. The company’s share price fell to 10 dollars last year, down from 15 dollars in 2000 when it debuted on NASDAQ.

Other firms on the NASDAQ market are no different.

According to Hana Daetoo Securities, only Gmarket’s share price has increased, rising to 25.2 dollars Monday, up from 15.1 dollars when it was first listed.

The others have all seen drops, with Gravity’s share price falling from 12.59 dollars to 1.46 dollars; Webzen’s from six dollars to 3.42 dollars; and Pixel Plus’s from 32.04 dollars to 1.86 dollars.

Korean tech start-ups listed on the NASDAQ have experienced a serious plunge in share prices due to worsening financial performance and lack of new revenue sources in the wake of the dot-com bust.

Mirae enjoyed operating profit of 1.9 billion won in 2005 and 1.7 billion won last year, but suffered operating losses of 7.2 billion won in 2004 and 13 billion won in 2006.

○ Hedge funds scold senior managers

Certain Korean firms listed on the NASDAQ have faced unexpected investment problems.

When Gravity announced a worse-than-expected performance in 2005, its share prices nosedived. Investors filed a class-action lawsuit and Gravity settled the case after paying five billion won in December last year.

In 2006, hedge fund operators expressed their dissatisfaction over poor management performance and held an extra general meeting of shareholders to scold management.

A Gravity source said, “It cost around a billion won per year to be listed on the stock market, but daily trade volume accounts for only 0.01 percent of our shares and our share price is at its lowest level. We’re wondering whether to stay listed on the market.”

○ Assessment of effectiveness

Unlike NASDAQ-listed firms, the eight Korean companies on the New York Stock Exchange have shown good performance.

Among them, POSCO’s share price jumped to 139 dollars per share Monday, up from 37.25 dollars in 1994 when it was first listed.

Other firms seeing rising value are the Shinhan Financial Group (31.4 dollars to 99.04 dollars); Woori Financial Group (16.25 dollars to 55.26 dollars); LG Display (14.05 dollars to 21.54 dollars); SK Telecom (13.84 dollars to 22.22 dollars); and Kookmin Bank (25.74 dollars to 61.8 dollars).

The two Korean firms to see share prices fall are Korea Telecom (27.56 dollars to 22.33 dollars) and the Korea Electric Power Corp. (19.63 dollars to 15.86 dollars).

Stock experts say Korean firms should thoroughly analyze the pluses and minuses of listing on foreign stock markets.

aryssong@donga.com chance@donga.com