KONEX-listed companies will face stricter share distribution requirements, with the threshold rising from the current 5 percent to as much as 15 percent. Designated advisers will also be given priority negotiation rights when arranging transfer listings. The measures are aimed at strengthening liquidity and the growth-ladder function of the KONEX market.
According to the financial investment industry on Wednesday, the Korea Exchange (KRX) has pre-announced amendments to the KONEX listing rules and enforcement guidelines. Current rules require companies that have been listed on KONEX for more than one year to maintain at least 5 percent of total common shares as distributed stock, with failure to meet the requirement constituting grounds for delisting. The revised rules raise the threshold based on time elapsed since listing: 5 percent for stocks one year past listing, 10 percent for those two years past listing, and 15 percent for those three years past listing. A new requirement of "at least 50 distributed shareholders" will also be introduced.
The move is seen as designed to encourage founders and venture capital (VC) firms to sell existing shares, thereby increasing the volume of stock circulating in the market. The KONEX distribution requirement is a listing maintenance condition mandating that a certain percentage of shares, excluding fixed holdings of largest shareholders and related parties, be distributed in the market. It was introduced in 2019 to address sluggish trading caused by insufficient circulating volume. However, KONEX trading remains weak, with daily turnover stuck at around 1 billion won.
The designated adviser system will also be revised. The amendment requires that appointment contracts grant designated advisers priority negotiation rights regarding the selection of the listing arranger when KONEX-listed companies transfer to the KOSPI or KOSDAQ markets. This establishes a basis for securities firms that have supported KONEX companies, from sourcing to disclosure and listing maintenance work, to play a leading role in the transfer-listing process as well.
The KRX plans to implement the amendments as early as next month, following approval procedures by the Financial Services Commission (FSC). The new distribution requirements will be applied to existing listed firms in phases, while the 50-shareholder requirement will take effect from the end of next year, taking preparation time into account. The priority negotiation rights for designated advisers will be reflected in appointment contracts only for companies newly listed on KONEX after the system takes effect. "This will increase circulating volume while also strengthening incentives for securities firms to source and manage these companies," a financial investment industry official said.
