[Editors’ note: Since the Financial Supervisory Commission (FSC) and Financial Supervisory Service (FSS) of Korea relaxed stock market regulations in late 2005 to allow initial public offering by overseas companies, 3 NOD Digital Group Co., a Chinese company, became the first foreign company to list its shares on KOSDAQ (Korea Securities Dealers Automated Quotation) market in Korea.
In order to develop capital market in Korea, the FSC and FSS had previously revised stock regulations in order for overseas companies, which are not listed on overseas exchanges, to be able to hold initial public offerings in Korea. (Before the new measures, only previously listed overseas companies were allowed to seek a secondary listing in Korea, which had been obstacle to develop the country’s capital market.) The move by FSC and FSS to facilitate listing of overseas companies came as some overseas companies had been tapping the possibility of listing on the Korean stock market.
To list shares on Korean stock market, overseas companies shall be subject to the same listing requirements. Specifically, companies should have 20 billion won of annual average sales in the past 3 years and a minimum of 10 billion won of shareholders capital in terms of listing requirements for Korea’s regular stock market. As for listing on KODAQ market, the relevant company must have been established for 3 years and its shareholder capital must be 3 billion won or more, and return on equity (ROE) must be 10% or more in regard to the latest fiscal year (or, alternatively, at least 2 billion net profit must have been recorded). (There are different listing requirements for venture-type companies, but we do not discuss them here.)
After listing, overseas companies will be able to use accounting in the U.S. or under global standards when they submit financial statement to Korea Exchange, but they will be restricted from changing those accounting principals at their discretion after the listing.
In addition, overseas companies shall be required to make disclosures in Korean language and submit Korean-language extracts of their internal documents reported to headquarters so that local investors could assess the value of their stock more safely.
Please read the below newspaper article for further information on the listing by the first foreign company 3 NOD.]
Source: Joongang Daily; Aug. 18, 2007
Chinese audio components manufacturer 3NOD Digital Group Co. [which is the holding company, Cayman Island-based, of China’s Shenzhen 3NOD Electronics Co.] listed its shares on the Kosdaq market yesterday [August 17], becoming the first non-Korean company to list shares on Korea’s stock markets. 3Nod’s shares rose to a daily limit of 15 percent on yesterday’s closing, defying prevailing stock market gloom.
3Nod Digital Group started its first trading day with a price of 3,000 won ($3.16) per share, 20 percent higher than its initial public offering price. The share price initially tumbled to 2,550 won in the morning amid a downturn stemming from global credit fears but soon rebounded to 3,450 won per share, hitting the daily limit of 15 percent growth. It closed at 3,450 won.
The company had planned to sell 12 million shares at 2,500 won each, as opposed to the highest price of 2,200 won initially marketed to investors, [according to the company’s filing to Korean regulators]. Korean and overseas institutional investors applied for 236.8 million shares, almost 25 times the 9.6 million allocated, the company said.
Korea Exchange, operator of Asia’s fourth-biggest stock market by value, is seeking to attract companies from China, Vietnam and other Asian nations to list their shares. 3NOD’s shares are the first foreign listing after Huafeng Textile International Group Ltd., a Hong Kong-based fabrics maker, delayed a planned IPO.