KOSDAQ Faces Major Shakeup as 202 Companies Risk Delisting by September

Participants pose for a commemorative photo during the KOSDAQ 30th anniversary event held at the Conrad Hotel in Yeongdeungpo, Seoul, on July 1. From left: Kim Se-wan, head of the Capital Market Research Institute; Song Byeong-jun, chairman of the Korea Venture Business Association; Oh Gi-hyeong, chairman of the Korea Premium K-Capital Market Special Committee; Jeong Eun-bo, chairman of the Korea Exchange; Lee Ok-yeon, chairman of the Financial Services Commission; Lee Dong-hoon, chairman of the KOSDAQ Association; Kim Hak-kyun, chairman of the VC Association; Hwang Seon-o, deputy governor of the Financial Supervisory Service. [Photo by Yoo Dae-gil]

Starting July 1, a significant tightening of delisting regulations has prompted a fierce survival competition among 202 domestic companies listed as "penny stocks." Companies listed on KOSPI and KOSDAQ with share prices below 1,000 won account for approximately 7.3% of the total listings. With the exchange moving to eliminate low-priced stocks, a restructuring of companies that have failed to gain market trust for an extended period is anticipated.

According to the Korea Exchange, as of the previous day's closing price, there are 202 listed companies with share prices below 1,000 won, comprising 156 on KOSDAQ and 46 on KOSPI. This represents 8.6% of all KOSDAQ listings (1,824 companies) and 4.9% of all KOSPI listings (945 companies). Approximately 77% of penny stocks are concentrated on KOSDAQ, suggesting that the impact of the strengthened delisting criteria will be felt primarily in that market.

The market capitalization of penny stocks is also largely concentrated on KOSDAQ. The market cap of the 156 KOSDAQ penny stocks is 5.3166 trillion won, while the 46 KOSPI penny stocks have a market cap of 2.0633 trillion won, totaling 7.9493 trillion won. This is only about 1.05% of KOSDAQ's total market cap (approximately 504.6823 trillion won) and 0.04% of KOSPI's total market cap (approximately 6,928.9144 trillion won). While the number of companies is significant, their overall market share remains minimal.

Under the new delisting regulations effective today, companies with share prices below 1,000 won for 30 consecutive trading days will be designated as management items. If they remain below this threshold for 45 out of the next 90 trading days, delisting procedures will commence. Previously, companies could remain in a penny stock state for extended periods without immediate delisting, but now share price will be a key requirement for maintaining listing status.

The market capitalization criteria have also been strengthened. The minimum market cap for maintaining a listing has been raised to 30 billion won for KOSPI and 20 billion won for KOSDAQ. Even if a company's share price recovers to above 1,000 won, failure to meet the market cap requirement could still result in designation as a management item or trigger delisting review. The simultaneous application of delisting criteria and market cap requirements has raised the bar for low-priced companies to maintain their listings.

As of the previous day's closing price, there are 48 companies on KOSPI and 159 on KOSDAQ that do not meet the market cap requirement (excluding SPACs and preferred stocks). Notably, among the 156 KOSDAQ penny stocks, 64 do not even meet the 20 billion won market cap threshold. About 40% of all penny stocks are at risk under both the share price and market cap criteria. Even if companies manage to raise their share prices through stock consolidations, they may struggle to meet the market cap requirement without underlying corporate value, making it difficult to maintain their listings.

The tightening of delisting regulations is expected to further highlight the polarization among listed companies in the domestic stock market. Companies that improve profitability and financial structure to enhance corporate value are likely to attract investor interest, while those that remain in a low-priced state without performance improvements will face increasing pressure to delist. The financial investment industry anticipates that while volatility may increase in the short term, a medium- to long-term reallocation of funds toward sound companies will enhance market trust and investment appeal.

A financial industry official stated, "There have been concerns that the delisting regulations have been somewhat lax, but moving forward, companies that are not properly evaluated in the market will find it difficult to maintain their listing status. The focus will shift from stock consolidations and various favorable announcements to improving performance and corporate value, which will become paramount in this new phase."

* This article has been translated by AI.