[Reporter’s Notebook] Concerns Over Individual Investors Suffering as the ‘Delisting’ Blade Dulls

[Asia Economy Reporter Lee Seon-ae] At the beginning of the new year, I received an email from a reporter. Mr. Choi, who identified himself as a ‘Joorini (stock + child)’, said that he hastily bought a stock after it hit the upper price limit and kept rising. He purchased 650 shares at 1,650 won per share. However, the stock price then fell to around 1,300 won, making him anxious. Although the loss was not large, he felt uneasy and found out that the stock, which had risen just because it was delisted from the management stock list, was actually a ‘deficit stock’ for four consecutive years. Mr. Choi sighed, wondering why such a stock was removed from the management stock list.

Like the stock Mr. Choi bought recklessly, an abnormal phenomenon occurred in the stock market in December last year, where the value of ‘zombie companies’ surged sharply. On December 12, the first day when the delisting requirements were relaxed, nine stocks that had recorded operating losses for four consecutive years were removed from the management stock list, and companies such as AD Chips, Wonpung Mulsan, and Joongang D&M hit the upper price limit. Although these companies could fall into a state of capital erosion, speculation broke out simply because they were not immediately delisted.

The relaxation of the management stock designation criteria was an implementation of President Yoon Seok-yeol’s campaign promises during his candidacy. For KOSDAQ companies, requirements such as ‘designation as a management stock after four consecutive years of operating losses’ and ‘subject to delisting review after five consecutive years of operating losses’ were removed. This was due to strong complaints from individual investors caused by sudden trading suspensions.

The problem is that investors may actually suffer damage. Because the delisting criteria have been loosened, companies are not expelled from the stock market for most reasons of insolvency. There is a possibility of innocent victims like Mr. Choi, and the soundness of the capital market could be undermined.

There are already numerous cases where insolvent companies have been exploited for stock price manipulation. In particular, the most feared event for no-capital mergers and acquisitions (M&A) groups, which mainly use convertible bonds (CB), is when the companies they finance are delisted from the stock market. They may be secretly laughing at the dulled delisting blade. Although the intention to protect investors is good, there is concern that this may instead damage the market’s soundness and cause individual investors to suffer greatly again and again.

This content was produced with the assistance of AI translation services.