Key points
- About 307 Kosdaq companies, some 17% of the board, are sitting below the thresholds that can lead to delisting.
- Some of them have as little as a month left to fix it before the clock runs out.
- New rule since July 1: 30 straight trading days under 1,000 won (about 67 cents) or under 20 billion won (about $13.3 million) in market cap starts the process.
- Kosdaq broke below 800 on July 8, briefly reclaimed it on July 10, and has been unable to hold above that level since, closing most recently at 749.64.
About 307 companies on Korea's Kosdaq exchange, about 17% of everything listed there, are currently sitting below the price or size thresholds that can get a stock delisted. Some of them have as little as a month left on the clock to fix it. This is not a one-day story. It is what happens when a tightened delisting rule meets an index that cannot get back above a level that used to be nothing special.
What actually changed on July 1
Korea tightened its delisting standards for the Kosdaq, the exchange for smaller and growth companies, starting July 1. A company now faces a warning if its stock price stays under 1,000 won, about 67 cents, or its market value stays under 20 billion won, about $13.3 million, for 30 straight trading days. Once that happens, the stock is marked as a managed issue. From there, it has 90 trading days to spend at least 45 of them back above the line. If it cannot, delisting starts.
This did not come out of nowhere. Korean investors call a stock priced under 1,000 won a "coin stock," and regulators had been signaling for a while that too many of them were allowed to sit there indefinitely, some for years, without ever being forced to prove they still deserved a public listing.
307 companies, and what makes up that number
Different tallies taken on different days during July have put the number anywhere from around 200 to more than 300, since the count moves with the index itself. The clearest breakdown, from July 15, put 212 Kosdaq companies below the 20 billion won (about $13.3 million) market cap line and 147 below the 1,000 won (about 67 cents) share price line, with 52 companies falling under both. Add those up without double counting, and you get 307 companies inside the risk zone, close to 17% of the 1,800 companies listed on the board.
None of these 307 are delisted yet. Being inside the risk zone means the clock has started, not that the outcome is decided. Some will climb back above the line before their 30 days run out. Others will get the warning and still recover during their 90-day grace window. But a Korea Exchange official already said publicly that the first actual delistings under the new standard could show up as soon as August, next month.
Why the index keeps adding to that number
The timing makes this harder than it would be in a calm market. Kosdaq broke below the symbolic 800 level on July 8 for the first time in about 10 months, briefly reclaimed it the very next day, and has been unable to hold above that line since, closing most recently at 749.64. When an entire board keeps grinding lower, more companies drift toward the 1,000 won and 20 billion won thresholds over time, not fewer, which is why the July 15 count is probably closer to a floor than a ceiling by now.
There is also a second track running alongside the coin-stock crackdown. Companies that listed on Kosdaq using a technology exception, a path that lets young, not-yet-profitable firms go public early, used to get three to five years of grace before revenue or loss rules could force them out. Regulators are now requiring those companies to publish a value-enhancement plan to keep that exemption, which is a second way weaker Kosdaq names are being asked to prove themselves or leave.
The other side of the same policy
What makes this a strange moment for Kosdaq is that Korea is running two opposite plays on the same board at once. While regulators push out companies that cannot hold 1,000 won a share, the Financial Services Commission is also courting outside companies to list on Kosdaq for the first time, including a Boston biotech I wrote about becoming the first foreign company to list there in five years. Korea wants a smaller, higher-quality Kosdaq that both drives out its weakest existing members and recruits stronger new ones at the same time. Whether that actually works depends on which force is faster, the cleanup or the selloff.
Sources
- Investing.com Korea (Korean language): Kosdaq daily historical closes, including the July 20 close of 749.64
- Money Today (Korean language): Kosdaq closes at 791.84, down 37.59 points (4.53%), July 16
- Seoul Economic Daily (Korean language): about 300 Kosdaq companies at delisting risk, July 15
- Infostock Daily (Korean language): delisting-risk mechanics and thresholds, July 16
- Kyunghyang Shinmun (Korean language): new coin-stock delisting rule and technology-exception disclosure requirement, July 2
- Hankyung (Korean language): Kosdaq's coin-stock delisting countdown, July 3
- Investing.com Korea, via EBN (Korean language): Kosdaq's first close below 800 in 10 months, July 8
- Our earlier coverage: the first foreign biotech to list on Kosdaq in five years and the president calling Korea's market unstable
Figures are from South Korean market reporting as described above, converted to US dollars at about 1,500 won to the dollar. This is general information about market rules, not investment advice.
