[비즈한국] On February 12, the Financial Services Commission (FSC) unveiled measures to improve stock market quality and protect investors. The plan is to strengthen delisting criteria, with the market particularly focused on the massive crackdown on 'penny stocks' (stocks priced below 1,000 KRW). While an upward adjustment to market capitalization criteria was expected, there were no previous guidelines regarding penny stocks. Industry experts believe that because companies can boost their stock price by increasing their 'par value,' many will soon hold shareholder meetings to carry out stock consolidation.
Financial Authorities: "We Will Only Keep Healthy Companies"
The financial authorities' stance is to raise delisting criteria to ensure only 'healthy companies' remain. Through this announcement, the FSC stated it would also accelerate the increase of market capitalization requirements. Initially, the plan was to apply delisting criteria for market caps below 20 billion KRW starting January 2027 and below 30 billion KRW from January 2028, but this has been brought forward to 20 billion KRW from July of this year and 30 billion KRW from January of next year.
Notably, the criteria for delisting penny stocks will be applied for the first time. Starting in July of this year, listed companies with stock prices below 1,000 KRW will be delisted. If a stock price stays below 1,000 KRW for 30 consecutive trading days, it will be designated as a management issue. Afterward, if the stock price fails to rise above 1,000 KRW for at least 45 trading days within the following 90 days, it will undergo a review and be ultimately delisted from the stock market.
According to the exchange's simulations, this measure could lead to the delisting of at least 100 to as many as 220 KOSDAQ-listed companies.
Can You Just Raise the Par Value? It Won't Work
Since market capitalization criteria already existed, KOSDAQ-listed companies seem surprised by the 'penny stock criteria.' However, there is a sentiment that they can sufficiently respond to these measures by 'adjusting the par value upward.'
For companies with par values of 100 KRW or 500 KRW, a 'stock consolidation' to raise the par value to 1,000 KRW would automatically increase the stock price proportionally. For example, if a company's stock is currently 300 KRW with a 100 KRW par value, simply raising the par value to 500 KRW through consolidation would automatically boost the stock price to 1,500 KRW. Raising the par value to 1,000 KRW would make the stock price 3,000 KRW, easily avoiding the delisting criteria. While the company's total value (market cap) remains the same, the stock price figure traded on the market increases artificially, allowing them to dodge the FSC's 'penny stock measures.'
The CEO of a company with a stock price in the 600 KRW range said, "I was surprised by the government's announcement, but since the stock price goes up automatically if we raise the par value, we plan to hold a shareholder meeting soon to adjust it." He continued, "Companies sometimes even intentionally split their stocks to increase the number of shares, so delisting them simply for being penny stocks seems a bit excessive," expressing his frustration.
However, the government is also aware of 'par value adjustment.' The financial authorities anticipated that such adjustments could be abused as a means to extend the life of insolvent companies and implemented secondary measures. They added a requirement that even after consolidation, the stock must remain above the par value. This means even if a company meets the 1,000 KRW threshold through consolidation, they can still be delisted if they fall below the par value. The securities industry estimates that 20 to 30 listed stocks fall under this category.
The CEO of a listed company whose par value is over 1,000 KRW but whose stock price is under 1,000 KRW said, "Since they set the par value as a secondary criterion, we are now in a situation where we must raise the stock price above 1,000 KRW before July," adding, "Without immediate revenue growth or favorable news, we have been given an extra task of stock price management."