Tighter Market-Cap Rules Put Dozens of Korean Stocks at Delisting Risk
Eight Kosdaq companies have received delisting decisions for failing market-capitalization requirements, while tougher thresholds and a new penny-stock rule could put dozens more at risk from mid-October.
South Korea’s drive to raise the quality of its stock market is accelerating the removal of small listed companies, with dozens more facing key compliance deadlines from mid-October.
Eight Kosdaq-listed companies have received delisting decisions this year after failing to meet minimum market-capitalization requirements, according to Korea Exchange data reported Thursday. All eight decisions came in the second half of the year, after none were recorded on that basis during the first six months.
The companies are Coiz, Wonpoong Mulsan, Silla SG, KM Pharmaceutical, Gold&S, Soosung Webtoon, AFW and Sejin T.S. The change follows a sharp increase in the continuing-listing threshold for Kosdaq companies, from 4 billion won to 15 billion won at the start of the year and then to 20 billion won in July.
Under the revised rules, a company is designated an administrative issue if its market value remains below 20 billion won for 30 consecutive trading days. It then faces a delisting decision if it fails to stay above the threshold for 45 consecutive sessions during the next 90 trading days. The first decisions under the higher July threshold could arrive around the middle of October.
Seventeen Kosdaq companies had been designated administrative issues for insufficient market value as of Thursday. The Korea Exchange expects the tougher standard could lead to the delisting of roughly 50 Kosdaq companies during the second half. On the main Kospi market, one company was delisted on market-cap grounds in the first half, another received a delisting decision this week, and 13 have been placed under administrative designation following stronger requirements.
A separate rule introduced in July targets shares trading below 1,000 won. Fifteen Kospi companies and 30 Kosdaq companies have been designated under the so-called penny-stock rule. They also face decisions from mid-October if their shares do not maintain a price of at least 1,000 won for 45 consecutive trading days.
Regulators have added a route intended to soften the impact on otherwise viable businesses. Companies delisted solely for insufficient market capitalization may transfer to the smaller Konex market without a final liquidation-trading period if they meet profitability or equity conditions. A company can qualify by recording operating profits in two of the past three years, or by posting a profit in one year while holding at least 20 billion won in equity.
Silla SG has announced plans to seek a Konex transfer, potentially making it the first company to use the new option. Some market participants, however, question whether Konex offers an effective substitute because it attracts substantially less investor attention and provides weaker fundraising prospects than the larger exchanges.