The sharp winds of July, a major turnaround in the stock market brought about by the expulsion of ‘coin stocks’ and a game of survival > News

The core of this system reform is the strong pressure to exit low-priced stocks called ‘coin stocks.’ According to the amendment, if the stock price remains below 1,000 won for 30 trading days, it will be designated as a management stock, and if it does not recover to 1,000 won for more than 45 trading days in the next 90 trading days, it will immediately go through delisting procedures. These regulations began with the intention of increasing market transparency by eliminating low-priced stocks that are prone to stock price manipulation or speculative trading. Accordingly, many KOSDAQ listed companies are taking out the ‘stock merger’ card to artificially increase the unit price per share by reducing the number of shares in circulation. In fact, since the beginning of this year, the number of companies that have decided to merge shares has increased dozens of times compared to last year, indicating high tension in the market. However, since these accounting measures do not guarantee an actual increase in corporate value, there are a series of cases where the stock price fails to be defended even after the merger and falls back into a penny stock.

In addition to the coin stock requirements, the increase in market capitalization standards is also acting as a heavy shackle for companies. Starting in July, the market capitalization standard for KOSDAQ listing will be raised from 15 billion won to 20 billion won, and is expected to further increase to 30 billion won next year. Simply raising the stock price above 1,000 won is not enough, and the market capitalization itself, which is the number of issued shares multiplied by the stock price, must remain above a certain level to maintain the listing status. As a result, many marginal companies are risking their lives on ‘livelihood M&A’ or inflating their external figures to maintain listing rather than strengthening the competitiveness of their main business. In particular, as a large number of loss-making companies with a market capitalization of less than 30 billion won are subject to delisting, it has become more important than ever for investors to distinguish between the good and the bad. Experts are warning that the strategy of simply buying stocks at low prices can now become a very risky gamble.

Ahead of the implementation of the system, concerns in certain sectors, including the bio industry, are deepening. This is because biotech companies that take a long time to develop technology often experience sustained losses, which puts their stock price and market capitalization under downward pressure. Although there are opportunities for K-Bio in the global market, such as the recent simplification of clinical procedures by the U.S. Food and Drug Administration (FDA), the domestic regulatory environment is showing conflicting trends that are strengthening the pressure to exit. Some companies are trying to find a breakthrough through clinical success and technology exports, but small and medium-sized bio companies whose financing conditions have worsened have no alternative other than stock mergers. Some raise concerns that such uniform standards could force innovative companies with growth potential out of the market. Accordingly, voices are gaining strength that calls for urgent supplementary measures that go beyond simply strengthening the standards for exclusion and create an IR environment in which companies can be fairly evaluated in the market.

From the perspective of the market as a whole, there is an expectation that this measure will be a ‘rite of passage’ for improving the structure of the KOSDAQ market. As the KOSDAQ market has been pointed out as the main culprit of the ‘Korea discount’ due to speculative trading and unclear disclosure, the logic is that this opportunity should be used to reorganize the market into a market centered on blue-chip companies. The market promotion system (classification of premium, standard, and management groups) being reviewed by the financial authorities is also an extension of this constitutional improvement. However, the fact that rapid changes in the system can lead to a decrease in liquidity is still a factor to be wary of. Since damage to individual investors is inevitable when delisting stocks pour in, soft landing measures such as activating unlisted distribution markets such as K-OTC or providing sufficient improvement period for corporate revival must be accompanied. Ultimately, market trust will be achieved not only through strict exit standards, but also through the creation of a fair ecosystem where growing companies are treated and underperforming companies are eliminated.