The Korea Exchange recently decided on the final delisting of KOSDAQ-listed company NPX (formerly Bioptrum). Accordingly, NPX will undergo a series of transaction consolidations for seven trading days starting from the 29th. The Exchange's KOSDAQ Market Headquarters stated that its decision to delist NPX was made after comprehensively considering the company's continuity and management transparency.
NPX faced a delisting crisis shortly after being acquired by Samuel Hwang, who is well-known as the husband of actress Clara. The company pursued a sale of management rights as a self-rescue measure to maintain its listing status. It planned to find a new owner by contracting with a major accounting firm and M&A service provider by the end of the year.
Despite the company's announcement of its plans to sell management rights, industry analysts noted that the Exchange's final delisting decision stemmed from a lack of confidence in the authenticity of their intentions to sell. NPX stated it would change its largest shareholder through a private sale, but it was argued that a mere opaque management rights sale plan could not meet the heightened Exchange standards.
Financial authorities emphasizing the activation of the domestic securities market are focusing on eradicating stock price manipulation and stressing the elimination of marginal and insolvent corporations to achieve their policy goals. This is based on the judgment that zombie companies continue to linger in the stock market and are being exploited as conduits for stock price manipulation.
Insolvent corporations that become conduits for stock price manipulation ultimately face a review of their listing eligibility again. A typical improvement plan these companies propose as a self-rescue measure is changing their largest shareholder. The issue is that unfair trading forces often make deals with each other during this process of changing the largest shareholder.
A spokesperson for the Exchange expressed this as a "transfer of management rights from the right hand to the left hand." Changes in management rights through a private contract are performed through agreements among so-called "operational forces," and merely changing company signs would make it difficult to pass the listing eligibility review. In reality, changes in the largest shareholder through this method generally do not have the effect of improving the opaque governance structure.
The common opinion among listed company officials is that the Exchange has recently imposed stricter verification standards on insolvent listed companies than before. It is said that the Exchange's scrutiny has become much stricter especially when a listed company in danger of delisting presents the "largest shareholder change card."
Industry analysts suggest that for a corporation in danger of delisting to show a proactive will to improve its opaque governance structure, it must at least pursue a public method of selling management rights. A KOSDAQ-listed company official who recently received a grace period from the Exchange stated, "During discussions with the Exchange, I was told that if we improve governance through public sales, the Exchange would be able to review the improvement plan more positively," and added, "The unwritten rule in the industry is that private management sales will no longer earn recovery opportunities."
However, managing a public sale of management rights is not a "magic card" that can avoid delisting crises. An Exchange official said, "Just because a public sale is conducted does not guarantee that a company in crisis will be granted a grace period," adding that "since each listed company has different reasons for undergoing listing eligibility reviews, the Exchange reviews improvement plans considering the specific situations of the companies."