In an important milestone for Taiwan’s biotech industry, Diamond Biofund – one of the territory’s most well-established venture capital (VC) funds – became the first such firm to list on the Taiwan Stock Exchange last month.
Diamond, defines itself as an “evergreen” biotech venture capital fund, meaning that, unlike traditional closed-ended investment funds, it has an open-ended structure with no termination date where capital can be raised, repaid, or transferred on an ongoing basis. Evergreen funds are also permitted to recycle capital after an exit and provide a unique approach to investing in early-stage companies such as biotechs, focusing on long-term growth and sustainability rather than a fixed investment horizon.
“Looking ahead, Diamond Biofund hopes to play a more multi-functional role in linking more international capital, markets, technologies and products to Taiwan,” said William Lu, the firm’s chairman, as reported by the Taiwan Economic Daily.
Since its establishment in 2013, Lu asserted that Diamond Biofund has built a good track record in investing in early-stage biotechnology projects in Taiwan, and he hopes that this new milestone will further increase investment into this high-risk/high-reward sector. In a region where Taiwan is competing against big beasts with biotech capital market output values 6x (South Korea), 8x (Hong Kong), 16x (Japan) and 33x (mainland China) its size, these increased investment flows will be crucial.
The Taiwan Stock Exchange has announced that due to this being the first case of venture capital listing, certain measures will be implemented to enhance corporate governance and ensure stable management. These measures include an extended period of depository for major shareholders and stricter requirements. The extended depository period aims to provide stability and control, while the stringent conditions entail increasing the number of independent directors to more than two-thirds and strengthening information disclosure to address external concerns.
According to the Exchange, the current regulations allow general companies applying for listing to redeem the majority shareholder’s compulsory pooling of shares after one year. However, for companies listed on the Taiwan Innovation Board, the redemption period is extended to two years. After discussions held during the Board of Directors’ meeting, it was decided to lengthen the depository period for Diamond Biofund. The specific duration of the extended period is still being deliberated.
Furthermore, the Board of Directors of the Stock Exchange has requested Diamond Biofund to appoint a minimum of two-thirds of independent directors out of the total number of directors. Additionally, Diamond Biofund is required to provide clear explanations regarding monthly and quarterly disclosures, as well as the fair value of its investment targets. These measures are intended to enable investors to more effectively evaluate the reasonableness of the company’s share price.