[Edaily Marketin Reporter Song Seung-Hyeon ] As the slump in the initial public offering (IPO) market drags on, venture capital (VC) firms are gradually shifting their investment focus back to early-stage companies. Analysts say the appeal of pre-IPO investments—which once attracted a flood of capital—has waned as a string of “newly listed” stocks have failed to hold their offering prices after going public.

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ly Listed Stocks Falling Below Offering Price… Recovery Pressure Mounts Amid KOSDAQ Slump

According to investment banks (IBs) and the venture capital (VC) industry on the 21st, among the 26 companies newly listed this year (excluding SPAC mergers), the stock prices of 23 companies were below their IPO prices as of the closing price on the 18th of this month. Of these, 10 had fallen by more than 50% compared to their IPO prices.

StradVision, which debuted on KOSDAQ last June, has fallen more than 72% from its IPO price (12,000 won). StradVision’s institutional bookbuilding subscription ratio was 381 to 1—the lowest this year since preparations began—and the company set the IPO price at the lower end of its target range to restore market confidence. Ingenia Therapeutics, which went public last month, saw an even lower demand forecast competition ratio of 50.4 to 1. Only three companies—Cosmo Robotics, Makina Rax, and Ingenia Therapeutics—traded above their IPO prices. This suggests that the premise of pre-IPO investment—that a profit can be made simply by going public—is beginning to crumble.

With an increasing number of companies pricing below the offering price, a chill is setting in on the IPO market. According to KB Securities, the number of companies going public in the first half of this year was 17 (excluding SPACs), a 55% decrease from the same period last year (38). The total offering amount also fell by 49%, from 2.2095 trillion won to 1.1327 trillion won. Since the beginning of the year, when Essex Solutions—an affiliate of the LS Group—withdrew its application for a preliminary listing review amid controversy over dual listings, subsidiaries of major conglomerates have also been reviewing their listing schedules one after another.

The KOSDAQ index fell below the 1,000 mark last June, turning negative compared to the start of the year, and has since dropped to the 830 level. As early-stage startups are flowing into the KOSDAQ market, its slump is becoming a major concern for venture capital firms as well. Additionally, the market capitalization maintenance requirement for KOSDAQ listings was raised from 4 billion won to 15 billion won in January of this year, and further increased to 20 billion won starting in July. The Financial Services Commission and the Korea Exchange estimate that the number of companies facing delisting from KOSDAQ this year will rise from the initially projected 50 to around 150. Investment sentiment in the public offering market has frozen amid the combined pressures of delisting risks and controversies over dual listings.

According to Samjung KPMG, the share of IPOs in venture capital (VC) exits rose from 24.3% in 2022 to 37.9% in the first half of this year. In a structure where a significant portion of returns relies on IPOs, the cooling of the public offering market directly translates into pressure on fund returns. Kang In-hye, head of the IPO Support Center at Samjung KPMG, emphasized, “An IPO is not a short-term event that ends with listing approval or maximizing the offering price, but rather a process of continuously managing performance and stock prices after the listing.”

Capital Flows Back to Early-Stage Investments… “Selective Investing” Focused on AI and Deep Tech

As this trend continues, VC funds are shifting back toward early-stage investments. According to the Ministry of SMEs and Startups, new venture capital investments in the first half of this year totaled 8.8676 trillion won, marking the highest first-half figure on record. Of this amount, investments in early-stage companies with less than three years of operation totaled 1.8282 trillion won, a 56.4% increase compared to the same period last year. The number of early-stage companies receiving investment also rose from 499 to 643. This is interpreted as a strategic decision to secure equity at lower valuations rather than investing at high valuations just before an IPO, given the uncertainty surrounding exit timelines.

Conversely, funding for later-stage rounds, such as pre-IPO rounds, appears to be declining. Aston Science, a developer of therapeutic cancer vaccines, was valued at 60 billion won in its Series D (pre-IPO) round this year. This is less than half of its previous valuation, which had been around 150 billion won. The company voluntarily lowered its valuation after failing to pass the technology evaluation. Fearing that the public offering price might fall below the pre-IPO valuation, pre-IPO companies are proactively adjusting their pricing.

However, funds are not flowing into all early-stage startups. According to THE VC, from January to May of this year, there were 31 early-stage (seed to Series A) investments of 10 billion won or more, a 41% increase compared to the same period last year (22 deals). In contrast, the total number of early-stage investments during the same period fell by 13% to 295. The share of large deals—those exceeding 10 billion won—among total early-stage investments jumped from 50% last year to 75%, and 17 of the 31 deals were in AI and robotics companies. This suggests that the expansion of early-stage investment is concentrated on select AI and deep-tech companies rather than the ecosystem as a whole.

A venture capital industry official explained, “With most newly listed stocks trading below their initial public offering (IPO) price, there is even talk that the prospects for recouping funds from pre-IPO investments—made at high valuations just before listing—have become uncertain.” The official added, “In contrast, early-stage companies face less valuation pressure, so there is significant potential for profit even if the timing of their IPO is delayed.” He added, “As a result, the mood has shifted compared to when funds were pouring into the pre-IPO stage,” and noted, “We are now looking to allocate funds primarily to early-stage startups with unique technological differentiators.”