"Crackdown on 'Tricks' to Avoid Penny-Stock Status Through Mergers and Capital Reductions"...Re-Notice Issued for Revised Delisting Rules

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[The Financial News] Korea Exchange (KRX) has added safeguards to its revised delisting rules to prevent companies from bypassing penny-stock requirements.
\r\nKRX said on the 17th that it had re-noticed the revised delisting rules for the KOSPI Market and KOSDAQ market, and plans to implement them from July 1.
\r\nIn the revised proposal, some measures to block loopholes in penny-stock requirements were adjusted after reflecting opinions from listed companies and investors during the first notice period, which ran from April 4 to 10.
\r\nThe exchange decided to restrict distressed companies from evading penny-stock rules through excessive stock mergers and capital reductions.
\r\nGoing forward, companies that completed a stock merger or capital reduction within the past year before being designated as a monitored issue for penny-stock status will not be allowed to carry out another merger or capital reduction within 90 trading days after the designation. In addition, if such actions are taken within 90 trading days of the designation, the total merger or reduction ratio cannot exceed 10-for-1. If either condition is violated, the exchange will immediately classify it as a delisting reason.
\r\nUnder the previous rules, to prevent companies with share prices below par value from avoiding penny-stock requirements through stock mergers alone, delisting criteria included cases where the post-merger share price remained below par value.
\r\nHowever, that standard is difficult to apply to no-par-value shares, and concerns were raised that companies could still sidestep penny-stock rules through capital reductions without changing par value.
\r\nThe anti-circumvention measures for penny-stock rules will apply only to stock mergers and capital reductions whose changed listings are completed after July 1, the effective date of the revised rules.
\r\nOther existing measures, including higher market capitalization thresholds for delisting, the introduction of penny-stock criteria, new semiannual capital impairment requirements, and stricter penalty standards for disclosure violations, remain unchanged in the revised proposal.
The revised listing rules will be re-noticed on the exchange's website for one week, from the 17th to the 24th. KRX plans to obtain approval from the Financial Services Commission next month and implement the revised rules in July.
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nodelay@fnnews.com Park Ji-yeon Reporter