Financial authorities are said to be reviewing a plan to add stocks priced under 1,000 won, or "penny stocks," to delisting criteria. The move is seen as an attempt to speed up the cleanup of insolvent corporations in line with the government's push to revitalize capital markets.
Lee Eog-weon, chair of the Financial Services Commission, said on the 5th at a National Policy Committee briefing that "on the U.S. Nasdaq, 'penny stocks' are also a delisting criterion," adding, "We will introduce this so we can decisively clear out rotten products and fake products, and make room to display innovative products."
The government has identified restoring investor confidence as its top priority in efforts to energize the stock market. Penny stock listings are expected to roll out their own shareholder value measures to avoid being kicked out of the market.
As of on the 6th, there were a total of 170 penny stocks listed on the KOSDAQ market. That is about 10% of all 1,822 listed companies. As of that day, 56 stocks on the KOSPI market also traded below 1,000 won.
Financial authorities point to high volatility and the risk of being abused as shells for listings as reasons for adding penny stocks to delisting criteria. Currently, certain levels of market capitalization and revenue are among the delisting requirements, but officials appear to judge that these alone make it difficult to restore investor confidence.
In practice, the Nasdaq sets delisting criteria when a stock trades under $1 for 30 consecutive trading days. During a 180-day cure period, the stock must close above $1 for 10 straight days to maintain its listing.
Korea is also expected to craft a plan to remove penny stocks, taking into account both the characteristics of the domestic stock market and the Nasdaq's standards.