Hansae MK Faces Delisting Risk... CEO Jiwon Kim Put to the Test in Penny Stock Escape

Chronic Deficits, Capital Erosion, and Penny Stock Status
Financial Red Flags for the Fashion Company
Uncertainty Remains Over Restoring Market Confidence

There is growing interest in whether Hansae MK, a fashion company, can restore its corporate value as it embarks on a reverse stock split to shed its penny stock status. This is a 'strategic choice' in response to the government's decision to include penny stocks as delisting targets starting in July 2026. However, the prevailing assessment is that Jiwon Kim, the youngest daughter of the Hansae Group and CEO of Hansae MK since 2019, is facing a management test to improve the company's financial structure amid chronic deficits and capital erosion.

According to the Financial Supervisory Service's electronic disclosure system on March 17, Hansae MK announced a reverse stock split on February 25, raising the par value per share from KRW 500 to KRW 1,000. As a result, the total number of issued shares will decrease by about half, from 44,446,502 shares to 22,403,251 shares. The shareholders' meeting is scheduled for March 26, and the effective date of the new shares will be April 28. Trading will be suspended from April 24 to May 12, and the new shares are expected to be listed on May 13.

Jiwon Kim, CEO of Hansae MK

A reverse stock split, which combines several shares into one to reduce the total number of shares, proportionally increases the price per share (par value). Hansae MK stated, "The reverse stock split is a decision to maintain an appropriate number of outstanding shares and to help stabilize the stock price," adding, "We will continue to focus on improving our performance and stabilizing our financial structure this year, and will make ongoing efforts to stabilize the stock price and enhance investor confidence."

However, the prevailing analysis in the market is that this move is aimed at shedding the penny stock image. Recently, the Korea Exchange has included stocks trading at KRW 1,000 or less as delisting targets, out of concern that a proliferation of low-priced stocks could undermine market credibility. As a result, more listed companies are choosing reverse stock splits as a way to boost their stock prices. In this context, Hansae MK's reverse stock split is seen as an inevitable move to alleviate investor anxiety.

An investment banking industry insider commented, "A reverse stock split can make it appear as if the stock price has risen in the short term, but without improvements in financial structure or business competitiveness, there are limits to restoring market confidence. In particular, for companies like Hansae MK, which have been in the red for an extended period, it is difficult to escape the risk of delisting."

Indeed, Hansae MK's performance has continued to deteriorate since Jiwon Kim, the second-generation owner of Hansae Group, took the helm. In 2023, despite sales of KRW 316.8 billion, the company posted an operating loss of KRW 4.2 billion and a net loss of KRW 6.4 billion. In 2024, sales decreased to KRW 256.3 billion, while losses widened, underscoring the slow pace of financial improvement. According to last year’s consolidated provisional results, sales were KRW 248.9 billion, with an operating loss of KRW 12.1 billion and a net loss of KRW 28.9 billion. Although the scale of losses has slightly decreased compared to the previous year, the company remains in the red.

This deterioration in profitability has also impacted the financial structure, with total equity falling to KRW 18.7 billion at the end of last year and the capital impairment ratio rising to 16.2%. Although the company has not entered a state of complete capital erosion, concerns about financial soundness are increasing.

Hansae MK owns major fashion brands such as 'NBA', 'BUCKAROO', and 'Play Kids Pro', but its corporate value is not fully recognized by the market. As of the previous day's closing price, Hansae MK's market capitalization was KRW 26.5 billion, with a share price of KRW 591. Although the company's annual sales exceeded KRW 250 billion, its market capitalization does not even reach KRW 30 billion, indicating that it may be classified as a 'stock to avoid for investment.' The prolonged deficits, business restructuring, and capital erosion are negatively affecting the share price in a complex manner.

In particular, restructuring through the disposal of non-core businesses has continued. Hansae MK produced its CurlySue Edit brand only until the 2025 Spring/Summer (SS) season, after which production was discontinued. In April last year, the company liquidated the US subsidiary of the 'BUCKAROO' brand after 17 years, announcing plans to focus the BUCKAROO business on the domestic market going forward.

With the Korea Exchange tightening the criteria for designating management items and stepping up efforts to clean up low-priced stocks, the fate of penny stocks like Hansae MK has become even more uncertain. As the Exchange strengthens its oversight of low-priced stocks, if management improvement and business innovation do not accompany these changes, the reverse stock split is likely to have only short-term effects.

An investment banking industry expert also noted, "A reverse stock split is a self-help measure to shake off the 'penny stock' stigma, which makes it unattractive for institutional investors or funds to include in their portfolios due to its low price. However, unless fundamental improvements in business competitiveness and profitability follow, it will be difficult to restore investor confidence."

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