As the financial authorities unsheathed a blade to expel "zombie corporations," the market split between "welcome" and "fear." While some expect it to be the starting gun for resolving the "Korea discount," individual investors holding "penny stocks (share price under 1,000 won)" are in a panic.
That day, the financial authorities announced a "delisting reform plan for swift and strict expulsion of insolvent corporations," presenting ▲ operation of a focused management period ▲ strengthened four major delisting requirements ▲ and streamlined procedures. Starting in July this year, "penny stocks" that fail to exceed a market capitalization of 20 billion won or a share price of 1,000 won will be subject to delisting.
Investors in stocks on the brink of expulsion fell into panic. On Naver Pay Securities' main stock discussion boards, users said, "I should have sold at 1,300 won, but I regret that I didn't," and "I lost tens of millions of won just here. Is there really no chance it can recover?"
An investor who invested in a corporation with a market capitalization of less than 20 billion won said, "The market cap only just barely exceeded 15 billion won recently; can it really get back to 20 billion won?" expressing thoughts of cutting losses.
On the other hand, there is also optimism that this measure could paradoxically become a "powerful share-price booster." The analysis is that, to avoid delisting, corporations will use every means, including share buybacks and bonus issues, to restore the share price to 1,000 won. One investor noted, "Since the delisting point is in July, companies may prepare self-rescue measures before then," cautioning against excessive fear.
Questions were also raised about fairness in applying a uniform price threshold. Critics said it is unreasonable to expel, on the same basis, a 100-won par value stock that rose to 500 won and a 5,000-won stock that plunged to 500 won. One investor argued, "A detailed standard that considers the share price relative to par value should be established."
However, that day the financial authorities explained that even if a company carries out a reverse stock split to avoid the penny stock delisting rule, it will still be included as subject to delisting.
Some say the move forces excessive sacrifices on small investors under the pretext of expelling insolvent corporations. A user of an online investing community said, "Why should small shareholders shoulder the losses when delisted?" and argued, "Punishment for misconduct such as management's breach of trust should also be strengthened." The user added, "If delisting is pursued without sufficient safeguards, the damage could fall on individual investors."