The delisting system targeting stocks priced under 1,000 won is 10 days away from taking effect. With more than 200 so-called "penny stocks" currently on the domestic market, some could enter delisting procedures as early as the fourth quarter of this year, according to projections.
According to the Korea Exchange (KRX) on the 21st, as of the 19th, a total of 219 listed stocks on the domestic market were priced under 1,000 won. That is 7.6% of all 2,877 listed companies.
By market, KOSDAQ had the most with 148 listed companies. That was followed by KOSPI with 42 and KONEX with 29.
The market cap of penny stocks totaled 5.5075 trillion won on KOSDAQ and 2.4413 trillion won on KOSPI. Including KONEX-listed companies, the overall size exceeds 8 trillion won.
These stocks will be directly affected by the delisting system that takes effect next month. Financial authorities and the exchange introduced a delisting rule for subpar share prices to curb speculative trading using low-priced stocks and to reduce market distortion.
The Korea Exchange (KRX) in April announced "Delisting reform measures for the swift and strict removal of insolvent companies." Under the plan, starting on the 1st of next month, stocks priced under 1,000 won for 30 consecutive trading days will be designated as issues under administrative watch.
If the subpar price condition is not resolved while under administrative watch, grounds for delisting will arise. Starting next month, the exchange will continually check for subpar prices and plans to notify the market via disclosures of any administrative-watch designations and the occurrence of delisting grounds.
A representative response available to penny-stock companies is a reverse stock split. This combines multiple shares into one to reduce the number of outstanding shares and raise the per-share price.
In fact, since discussion of delisting penny stocks gathered pace, the number of corporations pursuing reverse splits has surged. According to the Financial Supervisory Service's electronic disclosure system, from February through the 19th of this month, 219 corporations announced plans for reverse splits. Of these, KOSDAQ-listed companies accounted for 176, the majority.
However, the exchange plans to manage purely formal reverse splits aimed only at propping up share prices through institutional measures.
If grounds for delisting arise due to subpar prices, unlike other delisting grounds, separate improvement periods or relief procedures may be limited.
An exchange official said, "If the regulatory requirements are met, designation under administrative watch and grounds for delisting will occur," and added, "Because the subpar price requirement is a quantitative standard, unlike other grounds, a separate committee review process may not apply."