Stock mergers among listed companies have surged as the government moves to include "penny stocks"—shares trading below 1,000 won—in delisting criteria starting July. However, three out of four companies that announced mergers saw their stock prices decline afterward, showing minimal effect.
According to the Financial Supervisory Service's electronic disclosure system on March 6, 47 KOSPI and KOSDAQ companies have announced stock merger decisions this year. Of these, 45 made their announcements after February 12, when the Financial Services Commission unveiled plans to tighten delisting requirements including penny stock removal. Given that only 17 such disclosures were made throughout last year, the figure has nearly tripled last year's annual total in just two months.
Among companies that announced stock mergers following the regulatory tightening, 39 were penny stocks trading below 1,000 won. Some cases like KOSPI-listed power semiconductor manufacturer KEC escaped penny stock status after the government announcement, rising from 738 won on February 12 to 1,398 won on March 6. However, most companies saw their stock prices fall rather than escape penny stock territory. Only seven companies recorded price increases after announcing stock mergers. KOSDAQ-listed optical communication component manufacturer Bitgwang Electronics had a share price of 1,092 won at the time of the government announcement, but closed at 1,010 won on March 6, facing the risk of falling into penny stock status.
Starting July 1 this year, stocks that trade below 1,000 won for 30 consecutive trading days will be designated as administrative issues. They will be automatically delisted if they fail to maintain prices at or above 1,000 won for 45 consecutive trading days within the subsequent 90 trading days.
To prevent companies from using stock mergers as a loophole to escape penny stock status, regulators decided to include companies whose stock prices remain below par value even after mergers in delisting criteria. For example, KOSPI-listed Hansol Homedeco decided on March 3 to conduct a 5-to-1 stock merger, raising its par value from 1,000 won to 5,000 won. However, with shares trading at 592 won, even after the merger the combined price of 2,960 won would remain below par value, making it subject to delisting.
Even companies that narrowly escape penny stock status must still meet market capitalization requirements if listed on KOSDAQ. The KOSDAQ delisting market cap threshold, currently 150 billion won, will rise to 200 billion won in July and 300 billion won starting January next year. Among KOSDAQ companies that have announced stock merger decisions, five have market capitalizations below 200 billion won. Another five companies with market caps below 300 billion won could face delisting as early as next year. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., advised investor caution, noting that "expectations of share price support to avoid delisting could trigger short-term volatility."
