As financial authorities significantly tightened the listing maintenance requirements to weed out insolvent companies, the first delisting for falling short of market capitalization has emerged.
In particular, starting on Jul. 1, the listing maintenance requirements for the main board and the KOSDAQ market will become even more stringent, and the pace of expelling so-called "zombie companies" is expected to accelerate.
The Korea Exchange (KRX) on the 15th announced the delisting and trading suspension of Iljeong Industrial, an automobile parts specialist corporations listed on the main board. The reason was "falling short of market capitalization."
Earlier, financial authorities raised the listing maintenance requirements substantially through a reform plan for the delisting system. Previously, companies could maintain their listing by exceeding 5 billion won on the main board and 4 billion won on the KOSDAQ market, but as of Jan. 1 this year, the thresholds were strengthened to nearly four times higher at 20 billion won for the main board and 15 billion won for the KOSDAQ market.
In the case of Iljeong Industrial, it was designated as an issue under management after falling short of market capitalization for 30 consecutive days in March this year. To be removed from the watchlist, its market capitalization had to remain at least 20 billion won for 10 consecutive trading days and accumulate at least 30 trading days, but it failed to meet this, becoming the first delisting case.
According to the Korea Exchange (KRX), delisting due to falling short of market capitalization is executed immediately without an appeal process. In general delistings where appeals are permitted, delisting can be delayed through appeal procedures and injunction requests, but this case does not fall under that.
An exchange official said, "This case involves a formal ground for delisting, and among formal grounds, some allow appeals and some do not," adding, "Under current rules, failure to meet the market capitalization requirement cannot be appealed."
Starting on Jul. 1, the requirements related to falling short of market capitalization will be further tightened. The market capitalization requirements for maintaining a listing will be raised to 30 billion won for the main board and 20 billion won for the KOSDAQ market.
Currently, the number of main-board listed companies that fall short of the market capitalization requirements to be tightened on Jul. 1 stands at 11, and KOSDAQ-listed companies at 51 (excluding SPACs and preferred shares).
Meanwhile, Iljeong Industrial is scheduled to undergo liquidation trading from the 19th to the 29th and be delisted on the 30th.
Iljeong Industrial said, "The management and executives fully recognize our heavy responsibility for causing great concern and disappointment to shareholders due to this delisting," adding, "Even after delisting, shareholders' legal rights such as voting rights and the right to claim dividends and the validity of the shares will remain intact, and we will seek various measures to minimize inconvenience in stock trading."