KOSDAQ-listed companies recorded 29 stock consolidation decisions from the 1st through the 24th of this month, the highest count since March. The Korea Exchange implemented strengthened delisting criteria from the 1st of this month, requiring companies to maintain market capitalization above 20 billion won or stock prices above 1000 won to avoid management stock designation. The surge in consolidation decisions follows the KOSDAQ index decline to the 700 level, which lowered individual stock prices and market capitalizations, prompting companies to merge shares to avoid delisting risks.
Korea Exchange Implements Stricter Delisting Requirements
The Korea Exchange introduced new delisting standards effective from the 1st of this month. Under the revised rules, companies face management stock designation if their market capitalization remains below 20 billion won or stock price stays under 1000 won for 30 consecutive trading days. Companies failing to recover market capitalization above 20 billion won for 45 consecutive days within a 90-trading-day period after management stock designation face automatic delisting procedures without separate review. Stock prices must also meet recovery criteria within specified periods to avoid delisting.
Stock Consolidation Decisions Reach Four-Month High
According to the Korea Exchange on the 26th, stock consolidation decisions totaled 29 cases from the 1st through the 24th of this month. This represents the highest monthly count since March's 71 cases. Monthly consolidation decisions in prior months were: January 0 cases, February 16 cases, March 71 cases, April 10 cases, May 11 cases, and June 18 cases. The increases occurred around two key dates: February 12th when the strengthened delisting plan was first announced, and the 1st of this month when the rules took effect.
Companies are selecting share consolidation as a response measure to reduce the number of issued shares and raise per-share prices. This method allows companies to elevate stock prices above delisting thresholds in a short timeframe.
Post-Consolidation Stock Prices Show Significant Declines
Several companies experienced substantial price drops following share consolidation. TS Investment consolidated its par value from 500 won to 1000 won and resumed trading at a reference price of 2635 won on the 30th of last month, but its closing price on the 24th of this month reached 1430 won, a 45.7% decline. CNR Research also consolidated par value from 500 won to 1000 won, with its stock price falling 28.8% from a reference price of 2750 won to 1957 won during the same period. Gigarain, which resumed trading on the 29th of last month after consolidating par value from 500 won to 5000 won, declined 21.3% from a reference price of 9930 won to a closing price of 7810 won on the 24th of this month.
Um Su-jin, a researcher at Hanwha Investment & Securities, stated that while stock splits are often pursued to activate trading and perceived as positive news, stock consolidations are frequently aimed at avoiding delisting and are difficult to view positively. Um added that stock consolidations not accompanied by fundamental corporate value improvements such as financial soundness enhancement, sales expansion, and profitability improvement are nothing more than a house built on sand.
FAQ
What are the new KOSDAQ delisting criteria implemented this month?
The Korea Exchange introduced rules from the 1st of this month requiring companies to maintain market capitalization above 20 billion won or stock prices above 1000 won for 30 consecutive trading days to avoid management stock designation. Companies failing to recover within specified periods face automatic delisting procedures.
How many stock consolidation decisions occurred in July?
KOSDAQ-listed companies recorded 29 stock consolidation decisions from the 1st through the 24th of this month, the highest monthly count since March when 71 consolidation decisions were recorded.
What happened to stock prices after consolidation?
Multiple companies experienced significant declines after consolidation. TS Investment fell 45.7% from 2635 won to 1430 won, CNR Research dropped 28.8% from 2750 won to 1957 won, and Gigarain declined 21.3% from 9930 won to 7810 won following their respective share consolidations.
