This article was published on Jan. 17, 2025, at 5:25 p.m. on the CHOSUNBIZ MoneyMove site.
M-Venture Investment, a venture capital company listed on the KOSDAQ market, is expanding its business into semiconductor equipment manufacturing. This move aims to shake off the adverse effects stemming from a qualified auditor's opinion last year, which led to a trading suspension and a substantial review of its listing qualifications, and to enhance sales stability in semiconductor materials and components beyond their core investment activities.
According to the Korea Exchange on the 17th, M-Venture Investment has confirmed that it will add semiconductor equipment manufacturing and sales to its existing investment business, which includes venture capital investments. The relevant details were included in the improvement plan submitted to the exchange ahead of the substantial review of its listing qualifications in December.
The company is reportedly pushing to merge with Apple T, a semiconductor wafer cleaning equipment specialist based in Yongin, Gyeonggi Province, utilizing Bright Korea, a manufacturer of semiconductor dust-free cables. Bright Korea became a major shareholder (including convertible bonds) of M-Venture Investment in May last year.
M-Venture Investment has decided to directly acquire the merged entity of Bright Korea as soon as the merger with Apple T is completed. It is expected that M-Venture Investment, as the major shareholder, will pursue a small merger in which the board approval is only required to absorb the merged entity of Bright Korea via stock exchange.
The expansion of M-Venture Investment's semiconductor business is interpreted as an effort to lift the trading suspension and maintain its listing status on the KOSDAQ market. The company faced a trading suspension last March after receiving a qualified auditor's opinion due to limitations in the audit scope related to GCT Semiconductor, a venture portfolio company.
Last March, the limitation in the audit scope was due to insufficient data as the listing procedures of GCT Semiconductor on the New York Stock Exchange overlapped with the auditing procedures from the accounting firm. However, this has led to the substantial review for delisting. The qualified auditor's opinion rejection is considered a reason for potential delisting under the KOSDAQ market listing regulations.
After the trading suspension, M-Venture Investment promptly appointed Samjeong KPMG to conduct a fair value reassessment of GCT Semiconductor but has found itself facing potential delisting. This is because, despite receiving an auditor's opinion during a re-audit in September, weaknesses related to business continuity were revealed during the substantial review of its listing qualifications.
M-Venture Investment, a first-generation venture capital firm established in 1986, evolved from Shin Young Technology Finance. Although it has achieved around 800% returns by investing in companies such as Com2uS and WEBZEN, it appears that the company has not proceeded with additional fund formation since raising a fund worth 10 billion won in 2021.
On the 27th of last month, the KOSDAQ Market Department held a corporate review committee meeting to deliberate on whether to delist M-Venture Investment's stocks. This is due to the venture fund being limited to just one and the poor stock performance of the portfolio company GCT Semiconductor leading to an amortization treatment, making it unable to even receive management fees.
The actual corporate review committee pointed out that, as there is no revenue base for the venture fund, the sales of 3.5 billion won in 2023 were less than 2 billion won last year, indicating an unstable business structure. The committee is expected to evaluate the feasibility of normal business activities during the delisting deliberation process.
M-Venture Investment is likely to emphasize the section of revenue improvement through semiconductor businesses in the KOSDAQ Market Committee, which decides on delisting or granting improvement periods. Last year's sales for Bright Korea and Apple T were 7 billion won and 13 billion won, respectively, which, when simply added, exceeds 20 billion won.
M-Venture Investment is also strengthening its investment sector under the leadership of Suan Partners, which has become a major shareholder. Suan Partners, a private equity fund operator seasoned in the sector, aims to expand its business territory into venture capital and took over M-Venture Investment in December 2023, but faced a trading suspension just over three months after the acquisition.
Suan Partners is working to solidify M-Venture Investment's revenue base through its semiconductor business and is pushing for the normalization of the investment sector by leveraging the institutional private equity fund operating qualifications secured by M-Venture Investment in 2021. It is understood that there are plans to acquire the Korea Gold Exchange immediately.
Personnel composition will also be changed. The decision has been made for Hong Sung-hyuk, the former CEO who was a direct major shareholder and held an internal director's position after the management transfer, to resign. Hong had faced management capability criticisms from the exchange for leading investments in GCT Semiconductor and being overly focused on single corporate investments.
A securities industry source noted, "The rejection of the auditor's opinion was caused by M-Venture Investment's lack of documentation from GCT Semiconductor, which was preparing to go public, so there may be a sense of injustice on their part. However, the key issue now is how the exchange views M-Venture Investment's efforts to diversify its revenue streams."