Kosdaq reverse splits, capital cuts surge after delisting rules tightened
In short
Capital restructuring by Kosdaq-listed companies, including reverse stock splits and capital reductions, has surged since financial authorities tightened delisting requirements, according to a report by An Yu-mi, a senior researcher at the Korea Capital Market Institute. Kosdaq companies disclosing reverse-split decisions reached 220 as of Sept. 4, compared with about 10 a year earlier, and capital-reduction decisions rose to 65 from 23 in 2022. Sixty Kosdaq companies were designated as administrative issues between July and Sept. 4, and 27 of them have taken follow-up measures such as rights issues or share buybacks, An found.
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Financial authorities' tightening of delisting requirements has been followed by a sharp rise in stock and capital restructuring by Kosdaq-listed companies, according to a report by An Yu-mi, a senior researcher at the Korea Capital Market Institute. Yonhap and the Chosun Ilbo both reported the findings of the report, titled “Response Status and Evaluation of Risky Companies After the Strengthening of Kosdaq Delisting Requirements.” [ 1 , 2 ]
Under the revised listing rules, a stock that trades below 1,000 won for 30 consecutive trading days, or falls below a market-capitalization threshold, is designated as an administrative issue. A company is delisted if it fails to exceed the threshold for 45 or more consecutive trading days within 90 trading days. Yonhap reported that the revised rules took effect in July. [ 1 ]
An said Kosdaq companies disclosing reverse-split decisions reached 220 as of Sept. 4, compared with about 10 companies a year previously. That is about 14.7 times last year's total of 15 companies and about 3.7 times the 59 Kospi companies in the same period, indicating the activity is concentrated on the Kosdaq, she said. Capital-reduction decisions on the Kosdaq rose to 65 as of Sept. 4 from 23 in 2022, she said, 21 companies (47.7%) more than in all of last year. [ 1 ]
An counted 60 Kosdaq companies designated as administrative issues for failing the requirements between the rules' implementation in July and Sept. 4. Of these, 38 (63.3%) included a market capitalization below 20 billion won and 30 (50.0%) included a share price below 1,000 won, with 8 meeting both conditions. Twenty-seven of the 60, or 45.0%, took at least one follow-up measure after being designated: 13 rights issues, 10 reverse splits, 3 share cancellations, 3 share buybacks, 2 merger decisions and 1 bonus issue, with 5 companies using more than one measure. [ 1 ]
An said reverse splits lifted unit share prices right after relisting, but that many companies' prices subsequently fell again. She also said some of the designated companies had relatively sound financial and operating fundamentals. She called for the government to take supplementary measures and for the results of applying the current 20 billion won Kosdaq market-cap standard, the characteristics of companies actually delisted, and the impact of raising the criteria further to be examined. [ 1 ]
Why it matters
The rules are reshaping the Kosdaq, pushing low-priced, weaker companies into share restructurings intended to keep them listed rather than into outright delisting. An Yu-mi's findings suggest the market-capitalization threshold is catching some companies whose finances remain sound, which is why she called for the standard's application and any further tightening to be reviewed. The documents give no indication of how the regulator will respond.
Key facts
- Financial authorities tightened delisting requirements as part of measures to revitalize the stock market. [ 1 , 2 ]
- Under the revised rules, a stock trading below 1,000 won for 30 consecutive trading days or below a market-capitalization threshold is designated an administrative issue, with delisting if it fails to exceed the threshold for 45 or more consecutive trading days within 90 trading days. [ 1 ]
- Kosdaq companies disclosing reverse-split decisions reached 220 as of Sept. 4, versus about 10 a year previously — roughly 14.7 times last year's 15 companies and about 3.7 times the 59 on the Kospi in the same period. [ 1 ]
- Kosdaq capital-reduction decisions rose to 65 as of Sept. 4 from 23 in 2022, 21 more (47.7%) than in all of last year. [ 1 ]
- From the revised rules' implementation in July through Sept. 4, 60 Kosdaq companies were designated administrative issues; 38 (63.3%) for market capitalization below 20 billion won, 30 (50.0%) as penny stocks below 1,000 won, and 8 for both. [ 1 ]
- Of those 60 companies, 27 (45.0%) took at least one follow-up measure: 13 rights issues, 10 reverse splits, 3 share cancellations, 3 share buybacks, 2 merger decisions and 1 bonus issue, with 5 companies using multiple measures. [ 1 ]
- An said reverse splits raised unit share prices immediately after relisting but that many companies' prices fell again. [ 1 ]
- An said some designated companies had relatively sound financial and operating fundamentals and called for reviewing the application of the 20 billion won Kosdaq market-cap standard and the impact of raising criteria further. [ 1 ]
Confirmed by several sources
- The Korea Capital Market Institute's An Yu-mi published a report finding that reverse stock splits, capital reductions and other stock and capital restructuring increased after delisting requirements were strengthened. [ 1 , 2 ]
- Financial authorities tightened delisting requirements as a market revitalization measure, and restructuring activity by listed companies subsequently rose. [ 1 , 2 ]
Still unclear
- Whether the 20 billion won Kosdaq market-capitalization threshold will be adjusted. The documents report only An Yu-mi's recommendation that the standard's application be reviewed; no decision by authorities is reported.
- Whether the surge in reverse splits and capital reductions will reduce actual delistings. No outcome data is given; the documents say many reverse-split companies saw their share prices fall again, and a single report is the only source.
- Which authority issued the revised listing rules and the exact date the revision took effect. The documents refer to “financial authorities” without naming a specific body, and only document 1 says the revised rules took effect in July; document 2 is available only as a partial feed summary.