First company flagged under new market-cap rule as small firms brace for delisting

The first company has been placed on the administrative issues list for failing to meet tightened listing-maintenance requirements. Since July 1, financial authorities have required Kospi-listed companies to maintain a market cap of at least 30 billion won ($21 million) and Kosdaq-listed companies at least 20 billion won. Companies that fall short for 30 consecutive trading days are designated as administrative issues. With roughly a month having passed since the rules took effect, the first such designation has now arrived. Companies far below the threshold have largely resigned themselves to the situation, while those hovering near the line are throwing everything at propping up their share prices.

According to small and medium-sized enterprise industry sources Wednesday, the first company flagged for falling below the market-cap threshold since the tightened rules took effect is education firm i-Scream Edu. The company's common-share market cap remained below the required level for 30 consecutive trading days, resulting in its designation as an administrative issue on Tuesday.

The market-cap threshold for Kosdaq-listed companies in the second half of this year is 20 billion won. i-Scream Edu closed at 805 won on Tuesday, giving it a market cap of approximately 11.2 billion won — well short of the requirement. To meet the threshold, its share price would need to nearly double, rising to at least 1,435 won.

However, i-Scream Edu's recent earnings have shown improvement. In the first quarter of this year, the company posted sales of 20.3 billion won, down 16.8 percent from a year earlier, but swung to an operating profit of 853 million won. Net profit for the period also turned positive at 675 million won. While cost efficiencies have improved its bottom line, concerns about declining sales and the growth outlook for the education market continue to weigh on its share price.

On the Kospi, Enex is trading below the market-cap threshold. The company closed at 1,788 won on Tuesday. Despite completing a 5-for-1 share consolidation in May — raising the par value from 500 won to 2,500 won — its market cap still sits in the low 20 billion won range, short of the 30 billion won requirement that applies to Kospi-listed companies in the second half of this year.

Hanchang Paper has also taken steps to defend its listing. The company approved a 5-for-1 share consolidation earlier this year, cutting its listed share count from roughly 59.66 million to about 11.93 million shares. In June, it acquired approximately 2 billion won worth of treasury shares and canceled all of them to support its share price. Hanchang Paper closed at 3,210 won on Tuesday, giving it a market cap of 38.3 billion won — currently above the threshold, though a decline of more than 20 percent could again put its listing status in doubt.

Pressure to eliminate so-called penny stocks is also intensifying. Since July, companies whose closing price stays below 1,000 won for 30 consecutive trading days can be designated as administrative issues. If such a company then fails to maintain a closing price of 1,000 won or above for 45 consecutive trading days within the following 90 trading days, it becomes subject to delisting. Companies that have undergone share consolidations but still trade below par value will find it difficult to avoid the rule's reach.

Hankuk Paper MFG closed at 536 won on Tuesday, well below the 1,000-won threshold. The company approved a share consolidation at an extraordinary shareholders' meeting in July and is pursuing a relisting under the new share structure this month, aiming to lift its per-share price above the low-priced stock threshold. Hankuk Paper MFG faces additional risks from thin trading volume and heightened share price volatility, as its largest shareholder, Haesung Industrial, holds more than 85 percent of the company, leaving relatively few shares in public circulation.

Building materials firm Dongyang has also been watching closely after its share price recently dipped below 1,000 won. Even a brief rebound may not be enough — companies must sustain compliance across 30 consecutive trading days to avoid administrative-issue designation, and must then meet the recovery conditions after any such designation. A temporary price uptick alone is unlikely to eliminate the delisting risk.

Some companies struggling to maintain their listings are focusing on attracting capital through investor relations events to shore up their share prices. One company that recently carried out a share consolidation said it was planning to draw in institutional funds through IR events. "We're not yet at the point of worrying about falling below the threshold, but market volatility has been so high that internal discussions about how to respond are ongoing," a company official said.