Tighter delisting rules put $5.9 bil. of retail money at risk
Summary
More than 3 million retail investors hold penny stocks and low-market-cap shares that could face delisting as Korea tightens listing rules. Their holdings were valued at 7.85 trillion won, or $5.9 billion. The Korea Exchange said 238 KOSPI and Kosdaq companies met the risky criteria, and the stricter thresholds were delayed by six months to July. The Kosdaq remained well below its April peak after a sharp drop.
Key Facts
- Rep. Park Min-kyu of the ruling Democratic Party of Korea released data showing 3,126,710 retail shareholders were exposed to the risk.
- The combined value of their holdings was 7.85 trillion won, based on the latest annual reports.
- Of the 238 at-risk companies, 61 were listed on the KOSPI and 177 were listed on the Kosdaq.
- As of Aug. 25, 114 of 806 KOSPI-listed companies and 357 of 1,740 Kosdaq-listed companies failed to meet either the market capitalization or share price requirement.
- The Kosdaq fell about 47 percent from a year-to-date closing high of 1,226.18 on April 27 to 644.78 on July 30, then recovered to 813.50 on Friday.
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More than 3 million retail investors hold penny stocks and low-market-cap shares that could be at risk of delisting as Korea tightens listing requirements, data showed Sunday. Their holdings were valued at nearly 8 trillion won ($5.9 billion).
A total of 238 companies on the benchmark KOSPI and secondary Kosdaq either traded below 1,000 won a share or failed to meet minimum market capitalization requirements, according to the Korea Exchange. Of those, 61 were listed on the KOSPI and 177 on the Kosdaq, meaning the number of affected Kosdaq companies was nearly three times higher.
These companies had a combined 3,126,710 retail shareholders, with their holdings valued at 7.85 trillion won, based on their latest annual reports, according to Rep. Park Min-kyu of the ruling Democratic Party of Korea, who obtained and released the data. The tally may include duplication because one investor can own shares in multiple companies, Park said.
Korean financial authorities earlier this year announced tougher delisting rules aimed at improving the quality of listed companies and restoring investor confidence.
As of July, KOSPI-listed companies were required to maintain a market capitalization of at least 30 billion won, while the threshold for Kosdaq companies was 20 billion won. Stocks trading below 1,000 won also faced a separate delisting criterion.
The market capitalization thresholds are set to rise next year to 50 billion won for KOSPI companies and 30 billion won for Kosdaq firms. The tougher thresholds had been scheduled to take effect in January, but authorities said Friday they would delay implementation by six months to July to ease the impact on the market.
More companies are expected to face delisting pressure once the stricter rules take effect. As of Aug. 25, 114 of the 806 KOSPI-listed companies and 357 of the 1,740 Kosdaq-listed companies failed to meet the requirement for either market capitalization or share price.
Kosdaq's downward trend is expected to add pressure on companies already struggling to satisfy listing standards. The index fell about 47 percent from a year-to-date closing high of 1,226.18 on April 27 to 644.78 on July 30. It recovered to 813.50 on Friday but remained well below its peak.
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