Fear of Delisting Hits Stock Market
By Yoon Ja-young
Staff Reporter
A delisting fear has hit the Seoul bourse. Korea Exchange, the country's stock market operator, announced Thursday that it is determined to delist 11 firms from the stock market.
As 41 companies have not yet submitted reports or failed to get an audit opinion, the number of firms taken off could increase to 52. Among the 11 companies that are set to be removed, three ― Seokwang Construction, HBE Energy, Join Energy ― belong to the main market and the remaining eight ― Cynogen, Upert, 1001 Optical, Choongang Bio, Kores, Mogem, Edu Ark, Mobo ― belong to the junior Kosdaq market.
After the deadline for the stockholders to sell their stocks in seven days, the 11 companies will be delisted from the bourse.
Among the 30 companies that failed to get an audit opinion, seven are on the main bourse and the Kosdaq lists 23 such firms. If they don't make any objections, they will also go through the delisting procedure.
The stock market operator strengthened regulations early last year, which resulted in the delisting of 27 companies. It previously looked into only the company's capital and market cap to determine whether it could stay on the bourse. This year sustainable management and transparency will also be taken into account.
Accounting firms also make their auditing procedures stricter.
However, the delisting came as a shock for many small investors as they could lose their entire stake when a firm gets taken off. Even in a lucky case, they usually recover less than 50 percent of their investment.
The stock market operator said that there are some warning signs that the investors should take heed of.
For instance, investors should be careful when buying stocks of companies that have too frequent shareholder turnovers.
Those with too many business objectives or see a loss due to funding for other businesses should also be avoided.
The top financial regulator said that problematic businesses often include new business areas such as resource development businesses, but investors should be aware that these actually require long-term investment.
The stock market operator said that firms that reverse postings too often are hinting that there could be problems within. Investors should also note who are designated as the directors of the company.