Six KOSDAQ companies issued delisting risk disclosures between the 1st and 6th due to market caps below 20 billion won. The companies face management stock designation under strengthened delisting requirements that took effect this month's 1st, according to Korea Exchange data. The new criteria, announced by the government in February, require KOSDAQ firms to maintain market caps above 20 billion won and KOSPI firms above 30 billion won to avoid delisting review. The market cap requirement has emerged as the first major enforcement mechanism under the strengthened rules, as companies cannot circumvent it through stock consolidation tactics used to avoid penny stock delisting criteria.
Six KOSDAQ Companies Issue Delisting Risk Disclosures Between the 1st and 6th
Shilla SG issued a delisting risk disclosure on the 1st, followed by KM Pharmaceutical on the same day, OSP on the 2nd, Gold&S on the 3rd, Suseong Webtoon on the 3rd, and Wellkeeps Hitech on the 6th. All six companies fell below the 20 billion won market capitalization threshold required under the new delisting criteria.
As of the reporting date, the companies' market caps stood at: Shilla SG 8.2 billion won, KM Pharmaceutical 8.9 billion won, OSP 12.1 billion won, Gold&S 9.5 billion won, Suseong Webtoon 8.1 billion won, and Wellkeeps Hitech 11.7 billion won. These figures remain significantly below the 20 billion won delisting review threshold.
Most of the companies had already maintained market cap levels below the threshold for around 20 trading days, placing them within days of management stock designation. Under the new rules, companies whose market caps remain below 20 billion won for 30 consecutive trading days receive management stock designation. After designation, companies have 90 trading days to exceed the threshold for 45 consecutive trading days or face immediate delisting.
Government Strengthened Delisting Criteria Take Effect This Month's 1st
The government announced the strengthened four-category delisting requirements in February. Starting this month's 1st, KOSDAQ companies with market caps below 20 billion won and KOSPI companies below 30 billion won face delisting review.
The thresholds will increase in January next year. KOSDAQ companies will need to maintain market caps above 30 billion won, while KOSPI companies will face a 50 billion won threshold.
The new criteria also target penny stocks. Starting this month's 1st, companies whose stock prices remain below 1,000 won for 30 consecutive trading days face management stock designation.
Market Cap Criteria Block Stock Consolidation Workarounds Used for Penny Stock Rules
The market cap requirement has become the first enforcement target under the strengthened delisting rules because companies cannot use stock consolidation to circumvent it. Companies facing penny stock delisting criteria have responded with stock consolidations and par value mergers to raise their share prices above the 1,000 won threshold.
This year alone, approximately 240 stock consolidations and par value mergers took place. In June, one month before the new rules took effect, 41 companies decided on stock consolidations. This compares to just one consolidation during the same period last year.
Companies pursuing stock consolidation often suspend trading to complete the required procedures, effectively pausing their exposure to the new delisting criteria during the consolidation process.
240 Stock Consolidations Completed This Year as Companies Seek Compliance
Experts characterize the wave of stock consolidations as short-term measures that fail to address underlying business fundamentals. Kang Jin-hyuk, a researcher at Shinhan Investment & Securities, noted that stock consolidations aimed at avoiding delisting create a stigma effect rather than meaningful corporate improvement.
Companies face difficulty achieving fundamental business restructuring within the compressed timeframes imposed by the new delisting criteria. The consolidation activity reflects attempts to buy time rather than implement sustainable operational changes.
216 Companies Currently Below Delisting Thresholds Across KOSDAQ and KOSPI
As of the reporting date, 160 KOSDAQ-listed companies trade below 1,000 won, qualifying as penny stocks. An additional 56 KOSDAQ companies maintain market caps below the 20 billion won threshold.
On KOSPI, 41 companies each fall below the 30 billion won market cap threshold and the 1,000 won penny stock level.
Kang Jin-hyuk stated that the strengthened delisting requirements are expected to bring positive changes in terms of market quality improvement and trust enhancement through the full-scale exit of insolvent companies. However, he added that short-term volatility expansion centered on related stocks may be inevitable as expectations for stock price support to avoid delisting are reflected.
FAQ
What did the six KOSDAQ companies do between the 1st and 6th?
Shilla SG, KM Pharmaceutical, OSP, Gold&S, Suseong Webtoon, and Wellkeeps Hitech issued delisting risk disclosures between the 1st and 6th after their market capitalizations fell below the 20 billion won threshold required under strengthened delisting criteria that took effect this month's 1st.
Why is the market cap requirement harder to avoid than the penny stock rule?
Companies can use stock consolidation and par value mergers to raise their share prices above the 1,000 won penny stock threshold, but these tactics cannot increase market capitalization. The market cap criterion has no workaround, making it the first major enforcement mechanism under the new delisting rules.
How many companies currently face delisting risk under the new thresholds?
As of the reporting date, 160 KOSDAQ companies trade below 1,000 won as penny stocks and 56 maintain market caps below 20 billion won. On KOSPI, 41 companies each fall below the 30 billion won market cap threshold and the 1,000 won level.
