An increasing number of biotech companies are eyeing on the Korea Exchange’s “growth potential exception policy” to avoid rigorous requirements in an initial public offering (IPO) and secure stronger protection for investors.
Olipass, Bridge Biotherapeutics, and Syntekabio are planning to go public using the growth potential exception policy, industry sources said.
The growth potential exception policy eases IPO requirements for a company that has a high growth potential recognized by a securities firm or an investment bank. Just like the technology exception policy, the regulator allows exceptions in management performance requirements under the growth potential exception policy.
If a stock price of a company listed under the growth potential exception policy falls below a particular level, compared to the offering price, the IPO manager has to buy back the shares at the 90 percent of the offering price (put-back option). The policy puts more responsibility on the IPO manager to protect investors.
Cellivery Therapeutics, which went public on KOSDAQ in November, was the first company to use the growth potential exception policy. Unlike many other biotech firms whose shares went downward below the offering price and failed to recover, Cellivery is maintaining a stable stock price. The company’s stock price closed at 41,650 won ($35) on Monday, far higher than the offering price of 25,000 won.
Olipass, scheduled to go public on Friday, will become the second to use the growth potential exception policy. Mirae Asset Daewoo and Kiwoom Securities are managing the IPO. Olipass set the offering price at 20,000 won on Sept. 4.
Bridge Biotherapeutics is seeking Kosdaq listing under the growth potential exception policy, instead of technology exception. KB Securities and Daishin Securities are managing the IPO. The company had failed to go public under the technology exception policy twice. However, it is trying a third time after clinching a 1.5 trillion won licensing-out deal with Boehringer Ingelheim in July.
Syntekabio hopes to complete the IPO within the year. Having KB Securities as the manager, the company received “A” ratings from two technology evaluation institutions. After submitting a preliminary review application to the KRX on Aug. 26, the company is speeding up the Kosdaq listing.
Biotech companies prefer the growth potential exception to the technology exception because it is easier to receive technology evaluations.
The growth potential exception policy does not require a mandatory technology assessment. However, it is recommended for biotech firms. Cellivery, Olipass, and Syntekabio received technology evaluations. Bridge Biotherapeutics is likely to do so, too.
While the technology exception policy sets many conditions in technology evaluations, the growth potential exception policy does not. A company seeking IPO through the technology exception policy must receive a technology assessment from a KRX-designated institution. If the company fails to reach a particular standard (“A,” “BBB”), it can apply for it six months later.
In contrast, a company seeking the growth potential exception policy, it can reapply without such condition, and it can choose a rating institution.
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