Suspension of KM Pharmaceutical and Juyeon Tech commercial closure... Transactions are halted even for liquidation sale companies.
4 billion → 15 billion → 20 billion… Court points out grounds for early implementation and ‘45 consecutive days’
30% of companies with a market capitalization of less than KRW 20 billion are profitable companies... The same recovery requirements apply to the stock price of 1,000 won.
The delisting system, which was strengthened by the financial authorities and KRX to expedite the exit of insolvent companies, was up for court judgment three months after its implementation. Amid continued legal action from companies whose delisting was decided based on Market Capitalization, the court put the brakes on the early application process and the basis for recovery requirements. The impact is growing as other companies' exit procedures that were already in progress are halted.
KM Pharmaceutical (225430) and Juyeon Tech (044380) received a temporary injunction from the court on the 2nd to suspend the delisting decision. Accordingly, the decision to delist the two companies was suspended until the main judgment was confirmed. The suspension of designation as a management item, which Juyeon Tech also applied for, was not accepted.
The impact of the court decision also extended to stocks that had already entered liquidation sales. The exchange decided to suspend trading in Sejin TS (067770) and AFB R (312610), which were delisted due to lack of market capitalization, and reexamine the application of related regulations.
These companies are not the only ones taking action. Gold&S (035290) and Pintel (291810) also applied to the court for a provisional injunction over the management stock designation and delisting procedures.
The system’s sphere of influence is also not small. Last August, when the first reason for designation as a managed stock occurred according to the strengthened standards implemented in July, a total of 36 companies, including 9 KOSPI companies and 27 KOSDAQ companies, had reasons for designation or were added. Among the 27 companies on KOSDAQ, 23 companies were eligible based on stock price, 6 companies were based on market capitalization, and 2 companies met both criteria.
4 billion → 15 billion → 20 billion… 6 months earlier standard for decommissioning
The KOSDAQ Market Capitalization standard for maintaining listing was 40 Billion Won until last year. It was raised to 150 Billion Won in January of this year, and then again raised to 200 Billion Won in July.
The original schedule was to gradually increase it to 150 Billion Won this year, 200 Billion Won in 2027, and 300 Billion Won in 2028. The financial authorities introduced a delisting reform plan last February and advanced the upward cycle from annually to semiannual. Accordingly, the implementation date of the 200 Billion Won standard was also advanced by six months from January 2027 to July of this year. The intention was to quickly eliminate insolvent companies and increase market trust and fund distribution. The requirement for delisting of stocks with a stock price of less than 1,000 won was also newly introduced at this time.
However, KOSDAQ companies that have already been delisted in the second half of this year due to insufficient market capitalization are subject to the 150 Billion Won standard. According to KRX, as of the 25th of last month, eight companies, including Koiz, Wonpoong Trading, Shilla SG, KM Pharmaceutical, Gold&S, Suseong Webtoon, AFB, and Sejin TS, fall into this category. The 200 Billion Won standard, which has been in effect since July, will first determine whether recovery requirements are met from the middle of this month.
Not only the standard amount but also the recovery requirements have been strengthened. Previously, delisting could be avoided if the market cap exceeded the standard for 10 consecutive trading days or more than 30 cumulative trading days during the 90 trading days after designation as a managed stock. After reorganization, the standard must be maintained for 45 consecutive trading days during the same 90 trading days.
Rather than raising the Market Capitalization standard itself, the court questioned the process of applying it earlier and the basis for the recovery requirement of ‘45 consecutive trading days’. The court found that the exchange failed to present sufficient empirical data to support the validity of the 45 trading day period. The decision to advance the 200 Billion Won standard by 6 months was also considered as to whether the need for specific early implementation was sufficiently presented. The company's right to participate in the process was also reflected in the judgment as it is a formal requirement that can lead to delisting without a separate objection.
This decision is also notable in that there have been rare cases in which provisional injunctions related to delisting have been accepted. According to the Financial Services Commission, only two cases were cited among 85 delisting injunctions filed between 2021 and 2025. This time, KM Pharmaceutical and Juyeon Tech's applications regarding Market Capitalization delisting regulations were accepted one after another on the same day.
If the market capitalization is low, is it an insolvent company?... 30% of those under KRW 20 billion are in surplus.
Another problem that has been raised in the process of strengthening standards is that the market price, known as market capitalization, does not necessarily match the company's actual management status.
As a result of domestic independent research Institutional Investors Small Insight Research analyzing data from the Korea Federation of Small and Medium Business, KOSDAQ Association, and KRX, there were 149 companies listed on KOSDAQ with a market capitalization of less than 200 Billion Won at the end of July, excluding SPACs and foreign companies. Among these, 45 companies, or 30.2%, were counted as profitable companies.
Of course, the soundness of a company cannot be judged solely by whether or not it is in the black. However, as Market Capitalization is also a price formed in the market, it is not an indicator of a company's business foundation or recovery potential.
Companies' responses were also mixed. While some companies went to court, there were also companies that restored standards and escaped management status or chose to transfer to KONEX for listing.
Uncertainty also increased as transactions of companies that had already entered into liquidation sales were halted. As an exchange, this is a measure to reexamine the application of related regulations, but from the perspective of existing shareholders, it is difficult to immediately predict when trading will resume and whether or not it will be listed in the future.
Following the market cap, the stock price standard... Controversy spreading to the entire bankruptcy system
This court ruling concerns Market Capitalization standards, but it could also have repercussions based on stock prices. The same recovery requirement of ‘45 consecutive trading days’ also applies to the ‘stock price below 1,000 won’ delisting requirement that was introduced in July. Although this provisional injunction did not determine the effectiveness of the stock price standard, there remains room for the same issue to be raised in future related lawsuits.
In the first management stock designation, there were more companies subject to stock price criteria than market capitalization. Among the 27 companies that were designated or added as management stocks by KOSDAQ last August, 23 companies had a stock price of less than 1,000 won, and 6 companies had a market capitalization standard. Two companies met both criteria.
This also included profitable companies. JMI (033050) recorded sales of 898 Billion Won and Operating Profit of 41 Billion Won last year, but the stock price fell below 1,000 won, causing grounds for designation as a management stock. The company later decided on a 5-to-1 stock merger.
There are many shareholders affected. As a result of Small Insight Research's separate compilation of public data, the simple sum of the number of minority shareholders of 32 companies for which data was obtained among the 36 companies that had reasons for designation as management items according to the strengthened standards reached 470,367.
The financial authorities have slowed down the pace of raising the market capitalization standard once. The KOSDAQ market capitalization standard of 300 Billion Won, which was originally scheduled to be applied in January next year, was postponed by six months to July of next year. It was decided to allow companies subject to delisting to be transferred to KONEX, but it remains to be seen whether moving the market to KONEX, which has low liquidity, will lead to the protection of existing shareholders.
Since the court's judgment is at the preliminary injunction stage, the conclusion may differ in the main lawsuit. However, as the applications of KM Pharmaceutical and Juyeon Tech were accepted one after another on the same day, it may also have an impact on the lawsuits of other companies that have already taken legal action. It is difficult to rule out the possibility that additional companies in similar situations will knock on the court's door.
The exchange must first decide how to handle the stalled delisting process. As the court took issue with the early implementation process and the ‘45 consecutive trading days’ recovery requirement, it became difficult to just sort out whether individual companies were delisted. If additional provisional injunctions are cited, the controversy could spread to the method of applying delisting standards and the overall future reinforcement schedule, which is expected to increase the burden on the exchange's system operation.
