Prepare for the prodigal stocks

Korea Thrunet looks to list in Korea as other internet companies view the benefits of a home listing.

Korea Thrunet has announced plans to seek a secondary listing on its home exchange, the Korea Stock Exchange, by December this year. The move comes as Thrunet - like many Asian internet companies -looks for ways to boost its flagging shares which were listed on Nasdaq in November last year.

Thrunet has gone from an all-time high of $70.625 back in December down to a recent year-low of $8.625 this month. Moreover, average daily volume has gone down from 11.4 million shares traded in December to an average of just under 1.4 million shares traded every day in August.

According to Thomas Sung, investor relations manager at Thrunet in Seoul, the secondary listing is designed as much to support the share price as it is to seek extra liquidity in the stock. He hopes that by having the shares listed in the home market where Thrunet's actual business is, then it should attract additional investor interest in the Korean market. As only 16% of the company's authorized share capital is listed on Nasdaq, with the rest of the stock un-issued, Thrunet's stock is very tightly held. By listing some more of the share capital and increasing the float, more shares will be available for trading.

Coming home

Many Asian new economy companies have listed their shares on stock exchanges which are not in their home country of operations - usually the Nasdaq exchange. This was done for many reasons, although basically it came down to the fact that they could get higher valuations on Nasdaq than many could get on their indigenous exchanges.

Furthermore, companies with their shares listed on Nasdaq were deemed to have better acquisition currency than those with locally-listed shares. All-stock mergers are quite common in the telecom, media and technology sectors, and so the higher your stock is valued, the better you will fare in a consolidating market. So list your shares on the exchange that pays the most and you are at an advantage over your competition. List them on an exchange that requires the most disclosure and then potential merger partners will be more willing to take your stock as payment for the deal. QED - a Nasdaq listing gives you the Black Amex of buyout currency.


However, with the global sell-off in internet stocks, the gloss has definitely gone off being a foreign listed internet company on Nasdaq. Internet pioneers such as Pacific Internet, Korea Thrunet, Global Sources and are all trading way below their IPO prices and management wants that to change.

One of the main reasons that these companies are trading at such low valuations is that their stock is terribly illiquid. US investors on Nasdaq have a plethora of internet plays to invest in, most of them from the US. Apart from the biggest Asian internet stocks, US investors are generally not interested in trading Asian stocks. And if investors are not interested in trading them, then the investment houses are not interested in providing research coverage.

So to a large degree these Asian internet stocks have slipped into a twilight world of low liquidity, low visibility and finally low valuation.

East, west home's best

Coming home makes sense. Not only are investors more likely to buy stock in companies from their own countries, but Asian investors as a whole are now paying nearly the same valuations for internet companies as their US counterparts. Being stuck in Nasdaq hell, where no-one knows your company, no one cares and no one wants to buy your stock is a lesson in how not to run your equity financing.

This does not mean that the initial listing was wrong. Indeed with a secondary listing providing price movement and liquidity, the Nasdaq shares should become re-animated. And with re-animation, there could come acquisitions. So make way for the prodigal stocks.

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