Kosdaq Companies at Risk of Delisting Jump to 139 in Market Slump, Prompting Calls to Revise Rules

A growing number of Kosdaq-listed companies are falling into delisting danger as their market capitalizations drop below 20 billion won. The broader junior market has been hit by fund concentration in large semiconductor stocks and macroeconomic pressures, prompting calls to revise the rules as some fundamentally sound companies are being pushed toward delisting for reasons unrelated to their business.

According to the Korea Exchange on July 21, 139 Kosdaq-listed companies had market capitalizations below 20 billion won as of July 20, excluding SPACs and preferred shares. That was up 10.32% from 126 a month earlier. The number of retail shareholders exposed to those companies rose 18.59% to 1,559,087 from 1,314,718, based on annual reports for last year.

The increase comes as the Kosdaq index has fallen 25.11% over the same period. After reaching an intraday high of 1,229.42 in April, the gauge kept sliding and has now sunk to the 700 level. Fund flows have concentrated in semiconductor shares, while worries that the prolonged Middle East conflict could keep central banks in tightening mode have accelerated money leaving the Kosdaq market.

Trading activity has also dried up. Average daily turnover on the Kosdaq this month was 6.7859 trillion won, about half the 14.9122 trillion won recorded at the start of the year. Turnover has fallen more quickly since leveraged single-stock products tied to Samsung Electronics Co. and SK Hynix Inc. were launched in late May. Daily trading value was in the 15 trillion won range in May, dropped to the 10 trillion won range in June and fell to the 6 trillion won range this month.

The problem is that a market shock can send share prices sharply lower and push companies toward delisting regardless of their fundamentals.

Earlier in July, the exchange began applying stricter delisting rules meant to improve the quality of the Kosdaq market. A company becomes subject to delisting review if its market capitalization falls below 20 billion won. If it remains below that threshold for 30 consecutive trading days, it is designated as an issue under management. If it then fails to recover above the line for 45 straight trading days during the following 90-trading-day period, it is delisted without exception.

With the Kosdaq still under pressure, industry participants say the rules need supplementary measures, including limited exceptions, because even solid companies are struggling to meet the threshold.

Finetek Co., a maker of display parts and secondary-battery equipment, posted an operating loss of 870 million won in 2023. It returned to an operating profit of 600 million won in 2024 and expanded that to 1.9 billion won last year. Even so, its market capitalization remains below 20 billion won, leaving it subject to delisting criteria.

The same is true for Woojin B&G Co., a veterinary drug maker. The company posted an operating loss of 700 million won in 2023, then returned to profit in 2024 with operating income of 1.1 billion won. Last year, that figure doubled to 2.2 billion won. Its market capitalization remains around 17 billion won, putting it under delisting review.

According to the U.S. Securities and Exchange Commission, Nasdaq has also been moving since January to require listed companies to maintain a market value of at least $5 million. Under the proposal, companies that fail to meet the requirement would be removed immediately, with no separate grace period.

But Nasdaq last month prepared an amended proposal that would allow limited relief. Under the revision, a Listings Qualifications Panel could grant an exception of up to 180 days to companies that receive a delisting notice for failing to meet the market-value requirement. The move reflects concern that market shocks can temporarily depress a company’s value regardless of its growth prospects or financial health.

“There could be cases where a company is delisted because its market capitalization falls due to external factors even though its business and actual value have not changed,” an industry official said. The market-cap rule should be treated as a substantive delisting requirement rather than a formal one, the person added. Even if a company falls below 20 billion won, there should be a detailed review of whether it is still suitable to remain on the Kosdaq market.

Ko Jung-sam, Hankyung.com reporter jsk@hankyung.com