KONEX
Overview
KONEX (Korea New EXchange) is a stock market operated by the Korea Exchange exclusively for small and medium-sized enterprises (SMEs) and venture companies. It was designed to enable SMEs and venture firms with high growth potential to raise capital more easily. Officially launched on July 1, 2013, KONEX opens its doors to earlier-stage companies compared with the KOSDAQ market, which focuses on somewhat larger firms, thereby supporting the growth of newly founded enterprises. Although KONEX is a formal exchange market, it is characterized by eased listing review standards and specialized trading rules that lower entry barriers for both companies and investors.
Key Features
Background and Purpose of Establishment
KONEX is a product of policies introduced by the South Korean government in the early 2010s to revitalize the startup ecosystem and improve financial accessibility for SMEs. Criticism had been raised that the existing KOSDAQ market imposed stringent listing reviews and heavy post-listing maintenance burdens, making it difficult for early-stage SMEs and venture firms to raise funds through the stock market. In response, the Korea Exchange designed a market centered on institutional and professional investors rather than retail investors, while lowering the threshold for initial public offerings (IPOs), to support the growth trajectory of SMEs. KONEX subsequently came to play an important role in creating a virtuous cycle of capital within the venture ecosystem.
Listing Requirements and Procedures
KONEX listing requirements are considerably relaxed compared with those of KOSDAQ. There are no or low minimum standards regarding a company's business history, profitability, or sales; even loss-making companies can be listed if they possess technological and growth potential. The preliminary listing review is conducted by the Korea Exchange, which usually notifies the result within 45 business days. The required paid-in capital at the time of listing is at least KRW 500 million, far lower than KOSDAQ's KRW 1.5 billion and KOSPI's KRW 30 billion. In addition, requirements concerning the number of listed shares and shareholder distribution are simplified to reduce the burden on companies. After listing, companies must comply with regulations such as external audits, disclosure obligations, and KONEX-specific substantive review of listing suitability.
Market Structure and Trading System
The KONEX market adopts an approach that distinguishes between general investors and professional investors. Previously, only professional investors were permitted to trade, but from 2020, general investors who meet certain requirements and obtain trading approval have also been allowed to participate. Trading is mainly conducted through designated brokerage firms, and a market maker system has been introduced to supply liquidity. In KONEX, the daily price limit for stock trading is ±30% from the previous closing price, and unlike conventional markets, single-price auction trading is partially permitted even in after-hours trading. In addition, institutional investors and strategic investors such as venture capital firms are provided with opportunities to dispose of their mandatory holding stakes through over-the-counter transactions.
Investor Participation Requirements
For general investors to trade directly in the KONEX market, they must obtain KONEX trading approval at a branch of a securities firm. During this process, investors must receive an explanation of the market's risks and characteristics and satisfy criteria related to investment experience and assets. For example, conditions may include at least one year of investment experience in financial investment products or holding financial assets above a certain amount. This is intended to strengthen investor protection as a matter of policy, given that companies listed on KONEX carry relatively high risk. Institutional investors may participate freely according to credit rating or capital adequacy requirements.
Differences from KOSDAQ
KONEX and KOSDAQ both serve SMEs and venture companies, but they differ in the size and maturity of target firms and in the intensity of regulation. KOSDAQ focuses mainly on companies that generate relatively stable sales and profits, including technology-driven growth firms, whereas KONEX primarily lists early-stage companies. KOSDAQ has a longer listing review period and imposes stricter disclosure obligations and audit standards, while KONEX applies more relaxed rules. Moreover, the typical path for KONEX-listed companies is to move to KOSDAQ through a transfer listing after achieving growth. For this reason, KONEX serves not only as a capital-raising venue but also as a “stepping stone” for companies to transition to an upper-tier market according to their growth stage.
Advantages and Disadvantages
The greatest advantage of KONEX is that it opens the door to capital raising for SMEs and venture companies with a low threshold. It provides a useful means for securing operating funds needed in the early stages of a business and attracting investment necessary for technological innovation. In addition, the possibility that a company's value will be fairly assessed in the market and the potential for it to serve as a foundation for growth goals such as mergers and acquisitions (M&A) or transfer to KOSDAQ are important benefits. Disadvantages include poor trading due to low liquidity, the risk of misguided investment decisions arising from information asymmetry, and difficulties in protecting retail investors. It has also been pointed out that if a company remains marginal in size or its performance deteriorates after listing, trading may fail to become active, effectively paralyzing its capital-raising function.
Recent Trends
In 2024, the KONEX market saw institutional improvements carried out in multiple dimensions in connection with the government's venture promotion policies. The Korea Exchange partially eased the requirements for KONEX-listed companies to maintain their listing status, shortened the duration of substantive listing reviews, and expanded benefits for companies transferring from KONEX to KOSDAQ. In particular, from the second half of 2024, the weight of qualitative assessment for KONEX companies was increased, allowing even companies with poor profitability to maintain their listing if their growth potential is recognized. In addition, in early 2025, the tax exemption ceiling on capital gains from the transfer of shares of KONEX-listed companies was temporarily expanded, attracting greater investor interest. As of February 2025, the number of companies listed on KONEX reached approximately 150, and the cumulative number of listed companies is known to have surpassed 200. Nevertheless, the average daily trading value still amounts to only about 0.5% of KOSDAQ's, indicating that market revitalization remains an ongoing challenge.
Related Topics
- [[KOSDAQ]]
- [[Korea Exchange]]
- [[Small and medium-sized enterprises]]
- [[Venture company]]
- [[Initial public offering]]
- [[Startup ecosystem]]