Penny Stocks and Underperforming Firms Face Mass Delisting... How to Respond Amid the Wave of Delistings [Click-e-Stock]

Delisting Requirements Toughened: About 240 KOSDAQ Firms Now in the Danger Zone
Market Cap Thresholds Raised, Temporary Price Boosts No Longer a Way Out
"Regular Monitoring of Market Cap, Stock Price Trends, and Portfolio Holdings Is Essential"

As the KOSDAQ market marks its 30th anniversary, the delisting regime for underperforming companies is undergoing significant restructuring. Starting from the first of this month, new delisting requirements for 'penny stocks' trading below 1,000 won and higher market capitalization standards have been implemented, heightening the pressure on low-priced stocks, small-cap stocks, and consistently loss-making companies to exit the market.

On July 15, KB Securities reported that approximately 240 companies—about 14% of all KOSDAQ-listed firms—have entered the risk zone for potential delisting. The company advised investors to regularly review the stocks they hold.

Early Implementation of Market Cap Standards... Temporary Price Boosts Can No Longer Prevent Delisting

On the 14th, employees are monitoring the stock market and exchange rates in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. As of 9:05 a.m. that day, the KOSPI is trading at 6,669.64, down 137.29 points (2.02%) from the previous trading day. Following a sharp 8.95% drop to 6,806.93 the previous day, the downward trend continues.

The Financial Services Commission announced its "Delisting Reform Plan" in February to promptly and rigorously remove underperforming companies. Following amendments to Korea Exchange's listing regulations, the "Four Major Delisting Criteria" have been strengthened or newly established as of May.

The most notable change is the stricter requirement to maintain a minimum market capitalization. Plans to gradually raise the market cap threshold in January 2027 and 2028 have been brought forward. As a result, starting this month, the market cap threshold for KOSPI has risen from 20 billion won to 30 billion won, and for KOSDAQ from 15 billion won to 20 billion won; from January next year, these will further increase to 50 billion won and 30 billion won, respectively.

If a company is designated as "under review" for falling below the market cap standard for 30 consecutive trading days, it must exceed the requirement for 45 consecutive trading days out of the next 90; if not, immediate delisting proceedings will begin. KB Securities researcher Lim Jeongeun noted, "With the stricter application standards and monitoring system, it has become difficult to avoid delisting through temporary share price boosts."

In addition, along with the introduction of penny stock delisting rules, the standard for full capital erosion has been strengthened from the end of the fiscal year to the end of the half-year, and the threshold for cumulative penalty points for disclosure violations has been lowered from 15 points to 10. These measures have all been in effect since July 1. The Korea Exchange will operate an intensive management period monitoring the progress of delisting procedures through June of next year.

14% of KOSDAQ in the Danger Zone..."Regular Checks on Holdings Are Essential"

The Korea Exchange estimates that this year, the number of companies subject to delisting under the reformed regulations could reach around 150 on the KOSDAQ, a sharp increase from 8 in 2023, 20 in 2024, and 38 last year.

Currently, there are 143 KOSDAQ-listed companies with market capitalizations below 20 billion won, and 146 companies with share prices below 1,000 won (based on closing prices as of the 10th). Excluding those that meet both criteria, the number reaches about 240.

Researcher Lim cautioned, "When companies approach these thresholds and delisting risks become more prominent, capital outflows from the market may accelerate." She recommended that investors not only track the movement of market capitalization and share price but also regularly review their total equity on the Financial Supervisory Service's DART system and check for any disclosure violations on Korea Exchange's corporate disclosure channel (KIND).

This content was produced with the assistance of AI translation services.