The government said it will revise part of its delisting rules so that profitable companies are not pushed off the market simply for being penny stocks — shares trading below 1,000 won each — or for having a low market value.
Financial Services Commission Chairman Lee Eok-won said at a full session of the National Assembly's National Policy Committee on the 24th that the government would "review areas that need fine-tuning." The remark came after Rep. Kim Hyun-jung of the Democratic Party pointed out that under the new KOSDAQ delisting policy, even profitable companies could be delisted for being penny stocks.
Under the revised KOSDAQ listing rules, a company is designated as an administrative issue if its share price stays below 1,000 won for 30 consecutive trading days or if its market value falls short of the 20 billion won threshold. It is then delisted if it fails to exceed the standard for at least 45 consecutive trading days out of the following 90. Just a month after the delisting requirements were tightened, one in six KOSDAQ-listed companies had entered the range at risk of removal.
The problem is that with market value serving as a key delisting criterion, some listed companies face removal despite posting steady operating profits, simply because they fall below the market-value threshold. A 34% drop in the KOSDAQ index from its April peak has also deepened the price shock for individual KOSDAQ companies. According to Rep. Kim, 45 of the 149 stocks with a market value below 20 billion won as of the end of last month were profitable companies. Many of them hold assets worth more than 20 billion won.
With the tightened delisting requirements having taken effect on the 1st of last month, the FSC is expected to prepare measures aimed at closing gaps for unfairly affected companies rather than making sweeping changes. The United States, for example, uses standards such as shareholders' equity and net profit alongside market value, while Japan applies an average market value over a set period. "To restructure and normalize the KOSDAQ market, removing troubled companies must come first," Lee said. "Given the need for policy credibility, a full-scale policy change is not easy."
