'On the Brink': 27 Penny Stocks Designated as Stocks Under Management... 23 Resort to Reverse Stock Split 'Tactics'

Four KOSPI Companies and 23 KOSDAQ Firms, Including Those With Additional Grounds for Designation
Reverse Stock Splits Could Help 13 Stocks Avoid Delisting
Ten Companies Undertook Reverse Stock Splits Just Before Being Designated

As the condition for designating stocks trading under 1,000 won as “coin stocks” has been introduced, a large number of stocks that have remained in coin stock status for a prolonged period were collectively designated as stocks under administrative supervision. While listed companies facing the risk of being delisted from the stock exchange are resorting to ad-hoc measures such as reverse stock splits to cling to their listings, critics point out that this is an abnormal way of boosting stock prices without strengthening core business competitiveness.

First Designation of 27 Coin Stock Companies Under Administrative Supervision

According to the Korea Exchange on August 13, out of the 49 listed companies that received prior warnings about possible administrative designation due to the coin stock requirement, 27 were officially designated as stocks under administrative supervision the previous day. The warning announcements targeted companies that stayed in coin stock status for 25 consecutive trading days. If a company's stock price failed to rise above 1,000 won for an additional 5 consecutive trading days, it was designated under administrative supervision.

On the KOSPI, four companies – Ontide, Ilsin Stone, Hyungji Elite, and Daeyoung Packaging – were designated as such. On the KOSDAQ, 17 companies, including Woori Enterprise, TKGEA Gang, CMG Pharmaceutical, Shaperon, Joeunsaramdeul, JMI, SDN, Omni System, Inno Instrument, Eastaid, Noel, S-Energy, LabGenomics, Newintech, Abion, Hyungji Global, and E8, were newly designated. Additionally, six companies — BK Holdings, Ice Cream Edu, Wonpoongmul San, Barunson E&A, Suseong Webtoon, and AFW — were already under administrative supervision but had additional reasons for their designation.

The coin stock requirement, which has been in effect since last month, was introduced by financial authorities to accelerate the exit of insolvent companies from the domestic stock market. If a listed company's stock price stays below 1,000 won for 30 consecutive trading days, it is immediately designated as a stock under administrative supervision. If the same condition is maintained for another 45 consecutive trading days within a 90-day period, the company proceeds toward delisting.

23 Companies at Risk of Delisting Resort to Reverse Stock Splits as a Temporary Measure

There are also companies that, after receiving a prior warning of administrative designation or being officially designated as such, attempt to maintain their listing status through reverse stock splits. Nearly half of the companies under administrative supervision — 13 in total — have reverse stock splits scheduled through October. If the closing price after trading resumes post-reverse split is above 1,000 won, the company stands a better chance of escaping the 45-consecutive trading day coin stock condition that leads to delisting. Just five days ago, 10 companies that had received prior warnings about designation avoided being put on the administrative list as their trading was suspended for the remaining five days due to ongoing reverse stock splits.

With the introduction of the coin stock requirement, listed companies are increasingly turning to reverse stock splits to manage their stock prices. As of the previous day, there were 275 announcements of reverse stock split decisions for this year, over 22 times more than the 12 reported during the same period last year.

However, even if a company's stock price rises above 1,000 won after a reverse split, the risk of delisting remains if it cannot meet the stock market capitalization requirement. The current threshold is at least 30 billion won for KOSPI and 20 billion won for KOSDAQ, with the period for maintaining market capitalization the same as for the coin stock condition. Among the companies under administrative supervision due to the coin stock requirement, those failing to meet the market capitalization standard are Ontide on the KOSPI, and Woori Enterprise, E8, and Hyungji Global on the KOSDAQ.

Amid these developments, there have been cases of intra-group mergers to address these risks. In June, Humax announced that it would merge with Humax Holdings through an absorption-type merger, scheduled for October 1. The reason behind this move was stated outright: "There is a possibility that administrative designation and delisting procedures may be initiated," confirming that the goal was to avoid delisting. Humax and Humax Global each completed reverse stock splits in April, thereby avoiding the immediate risk of coin stock designation. However, after being warned on July 24 due to the market capitalization requirement, Humax Holdings is still failing to meet the criteria as its market capitalization remains around 11 billion to 14 billion won.

Sujin Um, a researcher at Hanwha Investment & Securities, commented, "While using self-rescue measures to overcome the risk of delisting is rational, companies should not focus solely on maintaining their listing at the expense of strengthening competitiveness in their main business." She added, "Rather than relying on short-term boosts such as reverse stock splits or intra-group mergers among low market capitalization subsidiaries, companies should pursue future-oriented investments such as expanding R&D."

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