[Editorial] Delisting Weak KOSDAQ Firms Should Lift Its Credibility Toward Nasdaq Levels

Starting in July this year, up to 220 weak companies listed on the KOSDAQ could be removed from the market. The move will be carried out under the "Improvement Plan for Delisting Insolvent Companies" announced by the Financial Services Commission on the 12th. Over the past 20 years, 1,353 companies have newly listed on the KOSDAQ market, while only 415 have been delisted, leaving problematic firms to pile up. The authorities now say they will clean out these insolvent companies.
To weed out such firms, the FSC has newly added stocks trading below 1,000 won, so-called "penny stocks," to the delisting criteria. These penny stocks tend to trade at only a few hundred won, show extreme volatility, and have small market capitalizations, making them easy targets for price manipulation. If a company designated as an issue-management stock fails to meet the market-capitalization requirement for 45 consecutive trading days, it will be delisted immediately. In addition, even a single case of serious and intentional disclosure violation will now trigger a formal delisting review.
This measure stems from the recognition that trust in the KOSDAQ has plunged. It comes right after President Lee Jae-myung wrote on social media on the 29th of last month, likening the stock market to a department store and warning, "If the shelves are full of rotten goods and fake products with no real value, who would want to come?" Policymakers appear to have concluded that, to sustain the policy slogan of lifting the KOSPI to 5,000 points and the KOSDAQ to 1,000 points, they must first strengthen confidence in the market itself rather than simply propping up the indices.
In reality, the KOSDAQ was launched in 1996 with the ambition of becoming a cradle for venture companies, but its current report card is disappointing. It now has about 1,800 listed firms, roughly twice as many as on the KOSPI, yet its total market capitalization is only one-fifth that of the main board. The number of players on the field has increased, but their financial strength has not kept pace, and the market has run into clear limits to growth.
Most troubling, the number of companies in such poor shape that auditors refuse to issue an opinion has been rising, shaking market confidence. Many firms still fail to provide sufficient information disclosure and maintain opaque governance structures. This chronic weakness of the KOSDAQ has eroded trust in corporate fundamentals, pushing investors away from rational valuation and toward short-term, event-driven speculation. As a result, even companies with solid technology and growth potential are not properly valued, and the entire market remains trapped in a vicious cycle of persistent undervaluation.
By contrast, the KOSDAQ’s role model, the Nasdaq Stock Market (NASDAQ) in the United States, has seen its index surge about 18-fold since 1996. Leading innovators such as NVIDIA, Apple, and Tesla have continuously attracted institutional capital, which has driven up their corporate value and, in turn, spurred even more investment. This virtuous cycle stands in stark contrast to the KOSDAQ, where prices often swing wildly on short-term trading.
If the KOSDAQ is to grow into a true "Korean Nasdaq," delisting weak firms alone will not suffice. The market must establish rules that allow both entry and exit to function smoothly, while also undertaking sweeping reforms to strengthen disclosure transparency, improve accounting and corporate governance, and build channels for long-term capital to flow into technology companies. Only when investors can trust the market enough to participate with confidence will a virtuous cycle of innovation and growth become possible.