Korea's financial investment industry is pushing to lower the thresholds of the "Tesla" conditions. Tesla conditions is a scheme designed to allow the listing of a start-ups with great growth potential even though they do not generate profits.
This move focuses on easing the "put back option" burden shouldered by the securities firms that are serving as an IPO lead manager for such start-ups. The industry expects this improvement to contribute to invigorating the listing of start-ups.
The conditions can be applied to money-losing start-ups whose market capitalization can be more than 50 billion won once they are listed. Other requirements include more than 3 billion won in annual sales and more than 20 percent annual sales growth over the past two years.
The securities firms, however, who serve as a lead manager for their IPO, should take the "put back option" burden. In other words, the securities firms should buy back the stocks at a price equivalent to 90 percent of the IPO price upon request from investors, if the stock prices of these companies fall after listing.
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