Earnings Season... Kosdaq Deficit Companies on Alert

Delisting Concerns for 22 Managed Companies... Korea Precision Machine and Others Face Exit Risk

On the 15th, the KOSPI opened at 3,108.70, up 8.12 points (0.26%) from the previous trading day, as employees were working in the dealing room of Hana Bank in Jung-gu, Seoul. The KOSDAQ opened at 965.83, up 1.52 points (0.16%) from the previous trading day. The won-dollar exchange rate started at 1,105.0 won, down 2.0 won from the previous trading day. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Park Jihwan] As the earnings announcement season returns, KOSDAQ deficit companies are on high alert. KOSDAQ companies that record operating losses for four consecutive years are designated as management items. Operating losses for five consecutive years are grounds for a substantive review of listing eligibility.

According to the Korea Exchange on the 16th, there are currently a total of 22 companies designated as management items by the exchange for recording operating losses for four consecutive years. If these companies fail to post operating profits on a cumulative basis in last year's performance, they will be designated as delisting candidates.

Among those that recorded operating losses for four consecutive years and failed to post cumulative operating profits through the third quarter of last year are 11 companies including Hanguk Precision Machinery, Araeseu, MP Group, Terasem, Sky Moon Technology, Luxel, U-Tech, EM Networks, S&W, J-Way, and SD System. Some of these companies are already at the crossroads of delisting. Hanguk Precision Machinery, S&W, and Sky Moon Technology are facing the risk of being delisted from the stock market after disclosing annual operating losses last year. On the other hand, some companies have written a turnaround story. Araeseu, U-Tech, and Terasem succeeded in turning their operating profits positive in last year's performance.

Among the 11 companies that had already turned cumulative operating profits positive since the third quarter of last year, Panajin, Natural Endotech, Pixelplus, Solgo Bio, and Alton Sports have also maintained an operating profit surplus in the fourth quarter, increasing their chances of being removed from the management item list. Although their earnings announcements are yet to be made, Kusundang, Action Square, CSA Cosmic, Barunson, and Mason Capital are also in a low-risk state for delisting due to improved performance last year.

KOSDAQ stocks are also designated as management items if they incur pre-tax continuing operations losses (law losses) exceeding 50% of equity capital in two out of the last three fiscal years. Currently, the exchange manages a total of 24 companies as management items for this reason. Companies that incurred law losses exceeding 50% of equity capital on a cumulative basis through the third quarter of last year include Joymax and Midas AI. Joymax, which recently announced its earnings, avoided designation despite posting a law loss of 9.1 billion KRW last year. This was because it increased its equity capital by more than 25 billion KRW through a large-scale paid-in capital increase, lowering the ratio of law losses to equity capital to the 16% range.