Wed, Jan 19, 2000 - Page 17 News List

VC firms denied permission to list

INVESTING While other Asian countries permit venture capital firms to trade on their bourses, Taiwan refuses to, saying the investments are too high-risk

By Stanley Chou  /  STAFF REPORTER

The latent risk taking that is the life and blood of venture capital companies has also prevented them from being listed on the stock exchange or Over-the-Counter board.

"Information disclosure is the major problem with venture capital," said Lin Tzong-yeong (林宗勇), chairman of the Securities and Futures Commission (證期會). "Since a venture capital company may control no more than 20 percent of a single company, the financial disclosure of the invested companies could generate problems."

As a result, the securities commission has decided not to allow venture capital companies to be listed under present conditions, Lin said.

Securities commission officials also attributed the refusal to allow venture capital companies to list to their major investments in high technology companies. These companies normally involved high risk and, therefore, should have their own sources of funds with which to undertake these high risks.

Furthermore, most of the high technology companies in which venture capital companies have invested have been listed on either the stock exchange or the OTC. So it would seem unnecessary for the venture capital companies to be listed again, the securities officials said.

While the decision was a setback for the venture capital industry, it came as no surprise.

"The decision reached by the securities commission was fully expected by us, as we have been trying to change this for seven or eight years," said Teresa Yang (楊正秋), director of Venture Capital Association (創投公會). "However, it already marks an improvement."

In the past, the government agencies would not even consider the issue, Yang said. Their decision to consider it provides optimism that venture capital companies will be able to be listed in the foreseeable future, she said.

The Council of Economic Planning and Development (經建會) recently suggested that the Ministry of Finance allow venture capital companies to be listed. In response, the securities commission studied the feasibility of such a move with the Taiwan Stock Exchange and the OTC.

For now, the joint decision reached by the commission and the finance ministry seems to be one of postponement, analysts said.

Taiwan's venture capital industry began operations in 1984. Since then, it has grown into one of Taiwan's major sources of capital for new high technology companies.

The industry now consists of 162 venture capital companies and total capital of NT$100 billion (US$3.3 billion). The largest venture capital company, WK Associates (普訊創投), currently holds more than NT$7 billion in capital, according to the company.

The question of whether venture capital companies should be listed on a stock exchange has been highly controversial in many countries, analysts said.

The biggest success story is the NASDAQ, which has allowed venture capital company listings since the 1970s.

Several other countries in Asia, including Japan, South Korea, and Singapore, have permitted the listing of venture capital companies on their OTC or exchange markets.

But still not in Taiwan.

"One Taiwanese venture capital company has already listed its shares on the stock exchange of Singapore because Taiwan said `no'," said VCA's Yang, referring to Hogung Investment Holding Ltd. "If Singapore could accept a Taiwan venture capital company, why can't we?" she asked.

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