KOSDAQ-listed company Kespion, a wireless communication device manufacturer, has struggled with stagnant stock prices for years. On February 23, it announced a 2-for-1 stock consolidation (from 500 won to 1,000 won per share). The stated purpose was to stabilize stock prices and enhance corporate value by maintaining an appropriate number of circulating shares. However, the real motivation was to avoid the so-called 'penny stock delisting' criteria set by financial authorities. After a trading suspension lasting over two months, trading resumed on May 4, but the stock closed at 751 won on June 1. The company's discussion forums are filled with anxious shareholders worried about delisting.
This year, KOSDAQ has seen a surge in stock consolidation announcements. Following the government's announcement in February regarding the delisting of penny stocks and reforms to the delisting system, related disclosures have skyrocketed. The number of stock consolidation announcements from January to May has increased more than twenty-fold compared to the same period last year. This move is seen as a 'survival' tactic to artificially boost stock prices. However, the limitations are evident. As of this year, one in three companies that decided to consolidate their stocks still have prices below 1,000 won, putting them at risk of being listed on the 'delisting death list.'
According to the Financial Supervisory Service's electronic disclosure system, 159 KOSDAQ companies announced stock consolidation decisions from January to May. This is a significant increase from just seven announcements during the same period last year. Excluding six companies that had their proposals rejected at shareholder meetings, a total of 153 companies are currently pursuing or have completed stock consolidations, representing about 8.4% of the total 1,822 KOSDAQ-listed companies (excluding SPACs).
The rush to consolidate is driven by the impending delisting of penny stocks. According to revised KOSDAQ listing regulations, if a company's stock price falls below 1,000 won for 30 consecutive trading days, it will be designated as a management issue. If it fails to exceed this threshold for 45 out of the following 90 trading days, it will face delisting procedures.
There are also measures to prevent circumvention. Companies that have conducted stock consolidations or reductions in the past year are prohibited from additional consolidations or reductions for 90 trading days after being designated as a management issue. Furthermore, any consolidation or reduction exceeding a 10-to-1 ratio is also prohibited during this period. Violating these regulations can lead to immediate delisting.
The problem is that stock consolidation is not a fundamental solution for escaping penny stock status. Among the 153 companies that have pursued or completed consolidations, 49 (32.0%) still had stock prices below 1,000 won as of the end of last month. For instance, Wonpung Mulsan, which decided on a stock consolidation in March, had a closing price of just 524 won on June 1. Other KOSDAQ companies at risk of delisting due to two consecutive years of delisting criteria include Samyoung ENC and Tubisoft, both of which have market capitalizations below 20 billion won. Currently, Samyoung ENC has been granted a three-month improvement period, while Tubisoft is awaiting a decision from the corporate review committee regarding its delisting.
A securities industry insider noted, "It is challenging for companies to improve their performance or financial structure in the short term, so many are likely to face delisting. Companies that cannot escape penny stock status through consolidation are at a significant crossroads for survival."
Market analysts caution against interpreting stock consolidation as a signal of improved corporate value. Consolidation merely reduces the number of circulating shares while increasing the price per share, without changing the market capitalization or actual value of the company. For example, Aptun, which resumed trading on May 8, saw its stock surge close to the upper limit immediately after trading resumed, but it ultimately closed down 17.54% from the previous trading day due to profit-taking.
In addition to KOSDAQ, companies in the KOSPI market are also facing delisting risks. There are 99 companies with market capitalizations below 30 billion won and 39 penny stocks with prices below 1,000 won. In total, 129 companies meet at least one of these criteria, excluding duplicates.
This year, there has been an increasing trend of forced delistings in the KOSPI market. In the past three years (2023-2025), only five companies were delisted due to reasons such as rejected audit opinions, but this year, five companies, including Daedong Electronics, Kookbo, Wellbiotech, IHQ, and Philux, have already been removed from the market. Recently, the delisting of Geumyang, which has 240,000 shareholders, has caused a stir. Geumyang is currently seeking a legal remedy against the Korea Exchange's delisting decision.
* This article has been translated by AI.
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