February 17, 2020

KRX slaps temporary ban on IPO sponsors following Invossa uproar

PUBLISHED : July 03, 2019 - 15:27

UPDATED : July 03, 2019 - 15:30

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Korea Exchange (KRX) said on July 3 that two South Korean investment banks will be restricted from sponsoring initial public offerings of a foreign company until November 2020 due to the uproar surrounding a listed firm’s troubled product Invossa and its impact on the domestic stock market.

The two investment banks -- Korea Investment & Securities and NH Investment & Securities -- were listing sponsors of Kolon TissueGene, which went public on second-tier bourse Kosdaq in November 2017. The company is a US-based arm of Korean conglomerate Kolon Group.

Korea’s sole stock bourse operator found its IPO underwriters responsible for Kolon TissueGene’s trading suspension since May, months after the drug maker pulled its cash cow Invossa for ingredient errors in April. Before the revelation, the drug was known to be a treatment for osteoarthritis. 

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The investment banks will be banned for three years from the date of the listing in 2017.

According to recent revisions of Kosdaq Market Listing Regulation and its Enforcement Rules that went into effect on July 1 this year, an investment bank will temporarily lose its eligibility to sponsor the listing of a foreign “technology growth company,” if one of the companies it sponsors faces trading suspension or delisting within two years of the IPO since 2016.

Technology growth companies refer to small and medium-sized enterprises whose technological capability and growth potential is recognized. The companies will have a higher chance of listing on Kosdaq and go through an eased rule for an IPO, despite their lack of profitability.

“Before the revision, a foreign company was not recognized as a technology growth company,” a high-ranking KRX official in charge of Kosdaq listing regulations told The Investor. “We are starting to allow investment banks in Korea to sponsor listing of foreign companies, and we are trying to narrow down investment banks without past bad records.”

This comes amid escalating tensions surrounding the Invossa developer. Sales and production of Invossa have been banned by the Ministry of Food and Drug Safety. A legal representative of small stakeholders of Kolon TissueGene filed damage suits against Kolon Invossa, as well as its IPO underwriters KIS and NHIS.

KRX currently plans to decide whether to delist Kolon TissueGene by July 10.

By Son Ji-hyoung (

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