Financial Services Commission. Yonhap News
Starting this July, stronger delisting rules will take effect in Korea, classifying “penny stocks” — shares priced below 1,000 won — as candidates for delisting.
The Financial Services Commission (FSC) on Thursday approved amendments to the Korea Exchange’s listing rules to implement the “Delisting Reform Plan for Swift and Strict Removal of Insolvent Companies.” The revisions center on four key measures: a new penny stock criterion, a higher market capitalization threshold for delisting, a new semi-annual capital impairment requirement, and tighter disclosure violation standards. The strengthened rules will take effect on July 1.
Under the new penny stock rule, a stock whose price remains below 1,000 won for 30 consecutive trading days will be designated as an issue for administration. If the stock then fails to exceed 1,000 won for 45 consecutive trading days within a 90-trading-day period, it will be delisted.
The FSC has also pre-emptively blocked workarounds through stock consolidation. Companies that have carried out a stock consolidation or capital reduction within the past year will be prohibited from conducting additional consolidations or capital reductions for 90 trading days after being designated as a penny stock issue for administration. Stock consolidations or capital reductions exceeding a 10:1 ratio will also be prohibited during the same 90-trading-day period.
Based on closing prices that day, there are a total of 210 penny stocks listed on the KOSPI, KOSDAQ, and KONEX. KOSDAQ had the most with 141, followed by 43 on the KOSPI and 26 on the KONEX. The figure represents 7.29% of the 2,879 stocks listed across Korea’s equity markets.
The market capitalization threshold for delisting, originally planned to be raised annually, will now be adjusted every six months. The detailed application method for the market cap requirement has also been improved to minimize delisting evasion through temporary share-price inflation and to expedite the delisting process. While full capital impairment had previously been a delisting criterion only at fiscal year-end, full capital impairment on a semi-annual basis has now been added.
For delisting based on disclosure violations, the threshold has been lowered from “an accumulation of 15 disclosure penalty points over the past year” to “an accumulation of 10 disclosure penalty points over the past year.” If a disclosure violation is deemed serious or intentional, even a single infraction will qualify as grounds for delisting.