Ahead of the July 1 rollout of tougher criteria by financial authorities for exiting distressed corporations, the number of companies opting for reverse stock splits has surged, centered on the KOSDAQ market. The aim is to shed the so‑called "coin stocks," whose per‑share prices are under 1,000 won. These companies are seen trying to avoid delisting risk by raising the per‑share price through a capital reduction without consideration via a reverse split that cuts the number of shares in circulation.
According to the Financial Supervisory Service's electronic disclosure system on the 15th, from the start of the year to on the 9th, a total of 45 KOSDAQ‑listed companies decided on a capital reduction without consideration via reverse stock split. That is a sharp increase of 246% from the same period last year.
This wave of mass reverse splits is because financial authorities are applying strengthened exit standards for distressed corporations in the second half. Starting July 1, authorities plan to fully implement delisting for coin stocks and a higher market capitalization threshold.
If companies reduce the number of shares in circulation through a capital reduction without consideration via reverse split, the stock price rises in proportion to the decreased share count, allowing them to escape coin stock status.
Under the revision, shares priced under 1,000 won are designated as under management, and if they fail to recover the 1,000‑won level for at least 45 consecutive trading days during a 90‑trading‑day period thereafter, they immediately enter delisting procedures. This is why KOSDAQ marginal companies whose per‑share prices were below 1,000 won have staked everything on "inflating the share price" through reverse splits to avoid being expelled.
However, completing a capital reduction without consideration via reverse split does not mean delisting can be completely avoided. Because such reductions are generally taken by the market as "bad news," indicating that corporations' financial structures are weak, companies must go all‑out to defend their share prices thereafter.
There is a real‑world case. Abpro Bio, whose share price hovered in the 100–200‑won range in January, carried out a capital reduction without consideration that consolidated 10 common shares into one. When trading resumed right after the reverse split, the price briefly soared to around 2,400 won, but soon turned downward and is now back around 920 won. It shows how difficult post‑reduction price defense can be.
The tougher market capitalization threshold is another obstacle. Until early this year, KOSDAQ‑listed companies could maintain their listings with a market cap of at least 15 billion won, but starting July 1 this requirement rises to 20 billion won.
In the case of Hyeongji I&C as well, it lifted the share price to nearly 4,000 won through a 10‑to‑1 capital reduction via reverse split in March, but as the price fell afterward, its market capitalization is now under 10 billion won.
At present, roughly one out of three companies (36%) that have announced a capital reduction without consideration via reverse split have market caps under 20 billion won, leaving them hard‑pressed to clear the tougher market cap bar starting in July.
A Korea Exchange (KRX) official said, "Because the two criteria are separate, a company will be delisted if it meets either the coin stock delisting standard or the market capitalization delisting standard," adding, "However, since there is a period of observation after designation as under management, we do not expect a flood of immediate delistings."