Kosdaq firms facing delisting to get Konex transfer option as market cap rules eased

The government is pursuing a plan to allow companies that meet certain financial requirements to transfer their listings to Konex without going through liquidation trading, even if they fall short of market capitalization thresholds.

The move reflects concerns that the broader investment slowdown in domestic markets could push even profitable, growth-oriented companies to the brink of delisting. The government will also delay by six months a planned tightening of the market cap threshold for delisting that had been set for January next year.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol convened a joint interagency market conditions review meeting — known as the F4 meeting — at the Korea Federation of Banks headquarters in Jung-gu, Seoul, on Friday, where the measures were discussed.

Earlier, the Financial Services Commission announced a delisting reform plan in February aimed at swiftly and strictly removing underperforming companies from the market. Under the revised rules, the minimum market cap required to maintain a listing was raised from July 1 to 30 billion won ($22.1 million) for Kospi-listed firms and 20 billion won for Kosdaq-listed firms. A further increase — to 50 billion won for Kospi and 30 billion won for Kosdaq — had been planned for January next year.

Under the framework, a company that falls below the market cap threshold for 30 consecutive trading days is designated as a watch-list stock. If it then fails to exceed the threshold for 45 consecutive trading days within the following 90 trading days, it proceeds to delisting.

The government decided to ease the rules as market conditions have changed. Kosdaq, which once broke above the 1,200 level, has recently fallen back to the 800 range, and the market caps of Kosdaq-listed companies have shrunk sharply, causing the number of firms falling below the threshold to jump.

Under the new plan, companies that meet certain financial requirements will be allowed to transfer to Konex without going through the liquidation trading process. Liquidation trading is a procedure that allows investors to buy and sell shares of a company slated for delisting for a set period before the delisting takes effect.

Konex is a stock market created to help small and mid-sized venture companies raise funds, operating at a smaller scale than Kospi and Kosdaq. The government aims to reduce the shock of delisting by allowing qualifying companies to transfer to Konex instead of going through liquidation trading.

The planned further increase in the market cap threshold, which had been scheduled for January next year, will be delayed six months to July next year. The government said it determined that the market needs time to recover.

Companies on the verge of delisting expressed relief at the announcement but also voiced frustration over the government's failure to specify the exact financial requirements for the Konex transfer option, as well as the difficulty of moving back from Konex to Kosdaq. In fact, not a single company has transferred from Konex to Kosdaq this year.

"It is a relief that the market cap increase scheduled for next year has been delayed, but there is still disappointment," a Kosdaq industry official said. "A company that transfers to Konex would have to go through a relisting process to return to Kosdaq, and trading volume on Konex is not high."

The official added that the government should also consider giving profitable companies a set period to improve or requiring them to draw up a plan to enhance corporate value, and only deciding on delisting if they fail to follow through.

Ahn Dong-hyun, a professor in the Department of Economics at Seoul National University, said Kosdaq is already pursuing a promotion-and-relegation system between two tiers, and adding a structure in which companies falling below the market cap threshold are transferred to Konex would make the market framework excessively complicated.