Lotus Pharmaceutical Co Ltd (美時化學製藥) yesterday submitted an application to trade its shares on the Taiwan Stock Exchange (TWSE), a shift from the smaller Taipei Exchange (TPEX), making it the first company to benefit from relaxed listing rules.
The two exchanges in March last year announced new listing requirements, allowing companies with a sizeable market value, comparable revenue and positive cash flow to trade shares on the stock markets, even if they have losses on their books.
Companies are no longer required to be profitable before listing.
“Lotus is the first company that applied to list its shares based on the new rules,” TWSE spokeswoman Rebecca Chen (陳麗卿) told the Taipei Times by telephone.
As of the end of last year, the generic drug maker had accumulated losses of about NT$1 billion (US$31.84 million), but has been profitable since 2017, Chen said.
Prior to the rule changes, companies with accumulated losses were not allowed to trade shares on the main bourse. Now they can apply if they have significant market value and strong revenue, she said.
Companies with a market value of at least NT$5 billion and revenue of NT$5 billion qualify to apply, while companies with a market value of NT$6 billion need NT$3 billion in revenue, as long as they report annual growth in revenue, she said.
Lotus’ market value surpassed NT$8 billion, while its shares closed at NT$98.9 on the TPEX yesterday. Its annual revenue has averaged NT$6 billion over the past two years, Chen said.
Companies also need to generate a positive cash flow the year before they apply, she said, adding that they are required to boost net value to two-thirds of paid-in capital.
The TWSE would complete its review within a month and its board of directors would make a final decision on whether to approve Lotus’ application, Chen said.
“To be frank, it is a surprise that a biotech company would benefit from the new listing rules, as we initially amended the rules for technology companies that have a shorter production cycle,” A TWSE department head surnamed Cheng (鄭) told the Taipei Times by telephone.
“Unprofitable companies qualify if they have large market value and revenue, but it is not easy for biotech companies that focus on new drugs to generate revenue so soon after beginning operations, as they have long waits to gain market approval from regulators,” Cheng said.
Similarly, it is usually difficult for companies that concentrate on generic drugs to have large market value, he said.
The exchange does not expect there to be another biotech company applying soon, Cheng said.
The exchange expected electric scooter manufacturer Gogoro Inc (睿能創意) to apply, as it has generated plenty of revenue, he said.
However, it has not expressed an interest as yet, he said.
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