Kosdaq Firms Below $14.4 Million Market Cap Rise to 139 as Selloff Fuels Delisting Concerns

The number of Kosdaq-listed companies at risk of delisting is climbing as their market capitalizations fall below 20 billion won ($14.4 million). A broad market slump, driven by heavy investor concentration in large semiconductor stocks and macroeconomic pressures, has left much of the Kosdaq market behind. That has prompted calls to revise the standard, with some companies facing delisting risk despite little change in their underlying business.

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

The increase comes as the Kosdaq index has slumped 25.11% over the same period. After reaching an intraday high of 1,229.42 in April, the gauge kept falling and has now retreated to the 700 level. Fund outflows from the Kosdaq have accelerated as investor demand concentrates in semiconductor shares and worries persist that the Middle East conflict could prolong central bank tightening.

Trading activity has also dried up. Average daily turnover on the Kosdaq was 6.7859 trillion won ($4.89 billion) this month, roughly half the 14.9122 trillion won ($10.75 billion) recorded at the start of the year. Trading value shrank more quickly after single-stock leveraged products tied to Samsung Electronics Co. and SK Hynix Inc. were launched in late May. Average daily turnover stood in the 15 trillion won range in May, fell to the 10 trillion won range in June and dropped to the 6 trillion won range this month.

The concern is that sharp share-price declines caused by broader market shocks are pushing some companies toward delisting regardless of their fundamentals.

Earlier this month, the exchange began applying tougher delisting requirements as part of efforts to improve the quality of the Kosdaq market. A listed company becomes subject to delisting review if its market capitalization falls below 20 billion won. If that status continues for 30 consecutive trading days, the company is designated as an issue under administration. It is then delisted without exception if it fails to rise above the threshold for 45 consecutive trading days during the following 90-trading-day period.

With the Kosdaq still under pressure, industry officials say the rules need safeguards, including limited exceptions, because even fundamentally sound companies are being caught by the requirement.

Fine Technix Co., a maker of display parts and secondary-battery equipment, posted an operating loss of 870 million won ($627,000) in 2023. It swung to an operating profit of 600 million won ($433,000) in 2024 and increased that to 1.9 billion won ($1.37 million) last year. Even so, its market capitalization remains below 20 billion won, leaving it subject to the delisting rule.

Woojin B&G Co., an animal pharmaceutical company, is in a similar position. It posted an operating loss of 700 million won ($505,000) in 2023, then returned to an operating profit of 1.1 billion won ($794,000) in 2024. Profit grew to 2.2 billion won ($1.59 million) last year. But its market capitalization remains around 17 billion won, putting it under delisting review.

According to the US Securities and Exchange Commission, Nasdaq in January moved to introduce a rule requiring 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 without a separate grace period.

Nasdaq, however, prepared an amended rule change last month to allow limited relief. Under the revision, a Listings Qualifications Hearing Panel could grant an exception of up to 180 days to companies that receive delisting notices for failing the market-value test if the panel determines that such relief is appropriate. The change reflects concern that market shocks can temporarily depress a company’s valuation regardless of its growth prospects or financial health.

"A company could be delisted because its market capitalization falls for external reasons even when its business and actual value have not changed," an industry official said. The official added that the market-capitalization rule should serve as a substantive, not merely formal, delisting standard. That should include a detailed review of whether a company is fit to remain on the Kosdaq even if its market value drops below 20 billion won.

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