After financial authorities toughened delisting requirements in July, the Korea Exchange (KRX) moved to rationalize the threshold for insufficient market capitalization. The exchange said it would determine whether a company falls short by taking into account the relevant ratios when an ex-rights date due to paid or bonus issues or an ex-dividend due to stock dividends occurs. Aimed at preventing unfair cases in which companies are put on a delisting track because of an artificial stock-price illusion, the change has already shortened the actual period of noncompliance for some corporations.
According to the Korea Exchange (KRX) on the 31st, the exchange revised the detailed enforcement rules of the KOSPI listing regulations on the 27th. The core of the revision is to make realistic the criteria for determining whether a listed company falls short on market capitalization. Accordingly, if an ex-rights date due to paid or bonus issues or an ex-dividend due to stock dividends occurs, the exchange will calculate shortfalls by reflecting the corresponding ratios.
Before the revision, whether a company fell short on market capitalization was judged based on listed market capitalization (measured by the number of listed shares). The exchange said this raised concerns of understating market capitalization when shares had been issued but not yet additionally listed.
A representative case is VIVIEN, a KOSPI-listed company. VIVIEN decided on a bonus issue on July 15 and issued new shares on the 3rd of this month, but because the actual additional listing took place on the 20th, a gap emerged in market-cap calculation. In fact, when the base-price adjustment was applied on the ex-rights date on the 31st of last month, the market capitalization plunged technically.
With the revision, VIVIEN's consecutive days under 30 billion won in market capitalization decreased to 16 days as of the 27th, from 28 days previously. However, its market capitalization still remains below 30 billion won, so unless the share price rebounds, the risk of being designated as an issue under surveillance due to insufficient market capitalization has not been completely eliminated.
Currently, to maintain a listing, KOSPI-listed companies must exceed 30 billion won in market capitalization, and KOSDAQ-listed companies must exceed 20 billion won. From January this year, the market-cap requirement to maintain a listing was 20 billion won for KOSPI-listed companies and 15 billion won for KOSDAQ.
Meanwhile, similar rationalization of the detailed rules is expected to proceed in the KOSDAQ market as well. The exchange said it preemptively revised the KOSPI enforcement rules this time, noting, "The same rationalization standards are expected to be revised for the KOSDAQ market going forward."