K-Wave Media (KWM), which faces the risk of being delisted from the Nasdaq, carried out a reverse stock split to restore the minimum bid price requirement of $1. After moving to a market with a relatively lower entry threshold within the Nasdaq, it took follow-up steps to maintain its listing.
According to the entertainment industry on the 8th, KWM implemented a reverse stock split on the 3rd local time, consolidating every 30 shares of common stock into 1 share. The number of outstanding shares will decrease to one-thirtieth of the previous total, and the per-share price will theoretically rise 30-fold. Before the split, KWM had 78,514,509 shares issued and outstanding, which, by simple calculation, will decrease to about 2,617,150 shares after the split. The reverse split itself does not change existing shareholders' equity percentages.
KWM was launched as an integrated media holding company formed by a coalition of film and drama production companies, content investment firms, and merchandising companies that run goods businesses. It drew attention in May last year by becoming the first in the entertainment industry to list on the Nasdaq. But this year it was notified by the Nasdaq that it failed to meet listing requirements. To keep its Nasdaq listing, the closing price of its common stock must be at least $1, and it must also meet market-capitalization standards for publicly held shares by listing tier.
In January, KWM's share price stayed below $1 for 30 consecutive trading days, and in June it also fell short of the $15 million public float market cap standard that then applied to the Global Market. To meet the conditions, KWM chose a reverse stock split. After the split, it must keep a closing price of at least $1 for a minimum of 10 consecutive trading days to receive official confirmation from the Nasdaq that it has regained compliance.
Industry watchers say the reverse split has partly reduced the delisting risk stemming from failing to meet the minimum bid price. However, because a reverse split does not increase a company's value, some also note that stable listing maintenance will require visible business results backed by improvements in the financial structure and expansion of sales and profitability.
Earlier, KWM received Nasdaq approval to transfer its listing market from the Global Market to the Capital Market. The Global Market is centered on mid- to large-sized corporations that must meet certain levels of market capitalization, public float value, and financial requirements. The Capital Market applies relatively lower listing and maintenance requirements for small- to mid-sized corporations in the growth stage. While the requirement to keep the common stock closing price at least $1 is the same, the public float market cap standard is lowered to $1 million.
The next task is business performance. KWM sold its subsidiary Play Company, which handled the merchandising business, to improve its financial structure, while pushing a business pivot centered on artificial intelligence (AI), including a graphics processing unit (GPU) operation and leasing business and data center investments. Recently, it also signed an exclusive letter of intent (LOI) with shareholders of a domestic unlisted semiconductor materials corporations to acquire a controlling equity stake.
A KWM official said, "We are focusing on identifying and pursuing business opportunities in high-growth industries, including corporations within the AI ecosystem," adding, "We are also reviewing businesses to enhance long-term shareholder value."
An industry official said, "KWM started with film and drama production and investment and an intellectual property (IP) goods business, but as it pushes to transition into an AI infrastructure corporations, its business identity is also changing," adding, "We will have to watch whether the series of investment plans leads to actual contracts and results."