Five KOSDAQ-listed companies that have suffered prolonged share price slumps have been designated as the first delisting candidates under a "penny stock" rule introduced in July, which covers shares trading below 1,000 won.
TKG Aekang (022220), Newintec (012340), Hyungji Global (308100), i-Screamedu (289010) and Barunson E&A (035620) closed on the 22nd at 773 won, 544 won, 301 won, 527 won and 418 won, respectively, according to the Korea Exchange. The five were placed on the watchlist on Aug. 13, or had the designation added to existing grounds, because their share prices were below 1,000 won. All five remained under that level through the 46th trading session since then.
The penny stock delisting rule took effect on July 1 to clear out troubled listed companies. A stock is placed on the watchlist if its regular-session closing price stays below 1,000 won for 30 consecutive trading days. If it then fails to hold at or above 1,000 won for 45 consecutive sessions within the following 90 trading days, it becomes subject to delisting. The five companies have only 44 trading days left, making it impossible to meet the recovery requirement. The first grounds for delisting have emerged about four months after the rule took effect.
i-Screamedu, an affiliate of the Sigong Group, failed to escape the risk of removal despite a tender offer by its largest shareholder. Sigong Tech (020710), which serves as the group's holding company, conducted a tender offer for i-Screamedu shares last month at 1,200 won apiece and acquired 2,650,711 shares. Its common stock holding, including related parties, rose to 56.09%, but the closing price on the 22nd of 527 won was less than half the tender offer price. It was also 40.92% below the 892 won recorded on Aug. 13.
TKG Aekang conducted two tender offers to pursue a voluntary delisting but fell short of its target volume. Largest shareholder TKG Taekwang sought to buy all remaining shares at 900 won apiece, but its final stake stood at just 82.45%. The penny stock grounds for delisting emerged while the company was pursuing a voluntary withdrawal from the market.
Legal challenges by the companies remain a variable before any actual removal. A court recently halted delisting procedures tied to tighter market capitalization standards. Delistings normally take effect after a liquidation trading period, but the process is suspended temporarily if a company files for an injunction with a court to block the move. The exchange, however, is said to maintain that the delisting rules based on penny stock grounds remain valid and that it will proceed with the removal process as planned.