Korea weighs delisting penny stocks to boost capital market

The KOSPI and Kosdaq indexes are displayed at Hana Bank’s dealing room in Seoul, Friday. Yonhap

Financial authorities are reviewing measures to make stocks trading below 1,000 won ($0.68) per share subject to delisting, as part of the Lee Jae Myung administration’s push to revitalize the domestic capital market, government officials said Sunday.

Data from the Korea Exchange show that the number of so-called penny stocks listed on the Kosdaq stood at 170 as of Friday, accounting for about 10 percent of the secondary bourse's 1,822 listed companies.

While the figure has edged down slightly from 178 at the start of this year, it represents a sharp 38.2 percent increase from early 2024, when 123 such stocks were listed. Over the same period, the Kosdaq index climbed from 878.93 to 1,080.77, indicating that the increase in penny stocks happened despite a broader market upswing.

On the country’s main bourse, the KOSPI, 56 stocks were classified as penny stocks as of Friday.

These stocks are typically associated with high volatility and are often viewed as prone to speculative trading and price manipulation.

Against this backdrop, authorities are reviewing whether penny stocks should be explicitly included in delisting standards. Under the current framework, delisting decisions are largely determined by market capitalization and revenue thresholds.

Lee Eog-weon, chairman of the Financial Services Commission (FSC), the country’s top financial regulator, said major overseas markets already apply stricter rules to penny stocks, pointing to the Nasdaq, where stocks trading below $1 can face delisting.

“We need to boldly adopt similar standards to decisively clear out unhealthy products so innovative companies can take their place,” Lee said during his appearance before the National Assembly on Thursday.

On the Nasdaq, a stock becomes subject to delisting if it trades below $1 for 30 consecutive sessions. Companies are then given a 180-day improvement period, during which the share price must remain above $1 for at least 10 straight trading days to maintain the listing. Failure to meet the requirement results in delisting.

Authorities here are studying such overseas precedents while crafting delisting rules tailored to the structure and conditions of the Korean stock market.

Experts broadly support the direction of phasing out penny stocks, but caution that clear and objective benchmarks are essential to distinguish structurally weak firms from those that are temporarily undervalued.

“There are cases where stock prices fail to properly reflect a company’s underlying asset value,” said Kim Dae-jong, a business professor at Sejong University in Seoul. “Asset-based criteria could also be considered as part of the delisting framework.”