More than 7 in 100 listed South Korean companies have fallen below the market capitalization threshold, just one month after regulators tightened delisting requirements to weed out financially troubled firms.
According to corporate analysis firm Leaders Index, 192 of the country's 2,578 listed companies — 833 on the Kospi and 1,745 on the Kosdaq — recorded average market caps in July that fell short of the listing maintenance standard. That amounts to 7.4 percent of all listed firms.
Breaking down the figures by market, 152 Kosdaq-listed companies, or 8.7 percent of the total, posted average market caps below 20 billion won ($14.1 million). On the Kospi, 40 companies, or 4.8 percent, came in under the 30 billion won threshold.
Financial authorities raised the minimum market cap required to maintain a listing starting July 1 — to 30 billion won for Kospi companies and 20 billion won for Kosdaq companies. Under the new rules, a company placed on the watchlist faces immediate delisting if it fails to stay above the threshold for 45 consecutive trading days within any 90-trading-day window.
The rules also tighten the share price floor: a stock that trades below 1,000 won for a sustained period becomes subject to delisting.
Half-year complete capital impairment has been newly added as grounds for a substantive review of listing eligibility. The threshold for triggering a review over disclosure violations was also lowered, from a cumulative penalty score of 15 points over the past year to 10 points.
The delisting risk is set to widen next year, when the market cap requirements rise again — to 50 billion won for Kospi companies and 30 billion won for Kosdaq companies.
Applying next year's standards to last month's average market caps, 479 of the 2,578 listed companies would fall short — equivalent to 18.6 percent of the total.
The Kosdaq would bear the brunt, with 367 companies, or 21.0 percent, failing to meet the threshold. That means more than one in five Kosdaq-listed firms would not clear next year's bar.
On the Kospi, 112 companies, or 13.4 percent, recorded average market caps below 50 billion won.
A total of 200 listed companies — 7.8 percent of all listed firms — had average closing prices below 1,000 won last month, making them so-called penny stocks. Of those, 156 were on the Kosdaq, accounting for 8.9 percent of that market, while 44 were on the Kospi, or 5.3 percent.
A company whose common shares close below 1,000 won for 30 consecutive trading days is designated a watchlist stock. If the share price then fails to stay at or above 1,000 won for 45 consecutive trading days within a subsequent 90-trading-day period, the company is deemed to have met the price-deficiency criteria and may be delisted.
"If share prices do not recover in the second half of this year, or if companies fail to boost their market caps through measures such as paid-in capital increases, the number of firms at risk of being placed on the watchlist could grow further when next year's tighter standards take effect," a Leaders Index official said.
moon@heraldcorp.com
