[Exclusive] 'Improving Listing Eligibility to Increase Value'... Will It Be a Non-Life Insurer Based on Market Capitalization?

Contract Signed for August 'Exchange Market Structure Reform' Service
Plan to Finalize Reform Measures Within the Year
Key Focus on Easing Delisting Criteria Based on Market Capitalization

Financial authorities and the Korea Exchange are discussing raising the 'market capitalization criteria,' one of the listing eligibility conditions, to the level of advanced countries such as Japan. This is an extension of the corporate value-up program currently being promoted by the government, aiming to smoothly delist marginal companies (zombie listed companies) that fall short of the criteria from the market to revitalize the stock market.

According to financial authorities and the financial investment industry on the 1st, the Financial Services Commission and the Korea Exchange plan to discuss a 'market structure reform' plan for the exchange to reasonably improve the listing eligibility criteria from the current standards. The Financial Services Commission will take the lead, the Korea Exchange will spearhead the initiative, and the Financial Supervisory Service will participate as well. To this end, a research service contract will be signed in August, with a mid-term report expected as early as October, and the reform plan is scheduled to be finalized by the end of the year.

A financial authority official said, "The current listing conditions (delisting) have been maintained for a long time, but there is a need to revisit listing eligibility to improve the qualitative growth of the Korean stock market," adding, "The interests involved are complex, so in-depth discussions are necessary. Nothing has been decided yet."

One of the prominent measures is to strengthen the market capitalization criteria compared to current regulations. According to the Korea Exchange’s delisting criteria for the KOSPI market and exit requirements for the KOSDAQ market, a KOSPI-listed company becomes subject to delisting if, after being designated as a management item, its market capitalization remains below 5 billion KRW for 30 consecutive days within 90 days. Similarly, a KOSDAQ-listed company becomes subject to delisting if, after being designated as a management item, it fails to meet the condition of having a market capitalization of at least 4 billion KRW for 10 consecutive days and a cumulative total of 30 days within 90 days.

Japanese listed companies must maintain market capitalization levels of 10 billion yen (Prime Market, approximately 89.5 billion KRW), 1 billion yen (Standard Market, approximately 8.95 billion KRW), and 500 million yen (Growth Market, approximately 4.5 billion KRW), respectively. Notably, the Japan Exchange bases this on 'free-float market capitalization.' A Korea Exchange official explained, "Only shares traded in the stock market excluding treasury shares are included in the market capitalization," adding, "The Prime Market requires a free-float ratio of over 35%, while the other two markets require over 25% each."

The U.S. Nasdaq market requires maintaining an average market capitalization of at least 50 million USD (approximately 69.2 billion KRW) over 30 consecutive days. Even considering the larger scale of the U.S. capital market compared to Korea, the domestic market capitalization conditions are relatively lenient.

Financial authorities and the Korea Exchange share a strong consensus on the direction of the exchange market structure reform. They aim to facilitate the exit of zombie companies to inject vitality into the stock market and encourage active participation from foreign and individual investors. This is also part of the government’s corporate value-up program.

In March, Kim Bok-hyun, Governor of the Financial Supervisory Service, stated, "We are reviewing measures to actively delist listed companies that fail to meet certain standards such as shareholder returns from the securities market," which aligns with this approach. Jeong Eun-bo, Chairman of the Korea Exchange, also emphasized in May, "If zombie companies are not removed from the market, investment funds will continue to be tied up," and added, "We will actively review delisting measures for listed companies in accordance with principles through consultations with authorities."

Meanwhile, financial authorities and the Korea Exchange have also commissioned research on strengthening the function of the KOSDAQ market alongside improving delisting conditions. They plan to discuss streamlining the management system for KOSDAQ-listed companies and incentives for fostering representative KOSDAQ companies.