Korea Exchange suspends wind-down trading for affected firms

Newintech, Hyungji Global file injunction bids

Exchange to wait for court ruling before proceeding

Earlier market-cap delisting cases also put on hold

[Getty Images Bank]
[Getty Images Bank]

Korea Exchange has suspended wind-down trading procedures for companies facing delisting due to share prices below 1,000 won — so-called penny stocks.

The move comes after two Kosdaq-listed companies filed injunctions at court seeking to halt their delisting decisions. Korea Exchange said it will proceed with the delisting decisions themselves but hold off on wind-down trading until the court rules.

Korea Exchange said Friday that Newintech and Hyungji Global had filed injunctions with Seoul Southern District Court that day, seeking to suspend the effect of their delisting decisions stemming from below-threshold share prices.

"In response to these injunction filings, we are suspending wind-down trading procedures for the companies concerned until there is a change in circumstances, such as a court ruling, in order to protect investors," the exchange said. "Korea Exchange will faithfully present its case in the injunction proceedings."

In connection with the litigation, the exchange also laid out its broader approach to market measures for all companies facing delisting due to below-threshold share prices. It will proceed with issuing delisting decisions but suspend wind-down trading for those companies until a court ruling or other change in circumstances.

The move is a precaution against potential investor harm that could arise if wind-down trading were completed before a court suspended the effect of a delisting decision.

Korea Exchange had suspended share trading Thursday for five Kosdaq-listed companies — TKG Aikang, Hyungji Global, Newintech, i-Scream Edu and Barunson Entertainment & Arts.

The five companies had been placed on the watchlist on Aug. 13 and then traded below 1,000 won for 45 consecutive trading days. They are the first cases to go through delisting procedures for below-threshold share prices since the delisting requirements were tightened on July 1.

Under the tightened rules, a company is placed on the watchlist if its share price stays below 1,000 won for 30 consecutive trading days. If the price fails to recover above 1,000 won for 45 consecutive trading days within the following 90 trading days, the company becomes subject to delisting.

Korea Exchange had pre-disclosed eight companies at risk of delisting on Oct. 7. Of those, three — Inno Instrument, E8 and Jeongmoon Information — have already had their trading suspended following decisions to consolidate their shares.

Market watchers are closely following whether the injunction filings will produce a similar outcome to earlier cases involving delistings for insufficient market capitalization. The 51st Civil Division of Seoul Southern District Court accepted injunction applications from Jooyontech and KM Pharmaceutical, which faced delisting for falling below the market cap threshold. The court found that the companies had not been guaranteed adequate opportunity to present their case or to file objections, and Korea Exchange subsequently suspended all market-cap-based delisting procedures pending a ruling on the merits.

Legal experts expect the central issue in future court proceedings over penny-stock delistings to be whether the requirement to sustain a share price above 1,000 won for 45 consecutive trading days is appropriate.

The number of penny stocks subject to delisting is expected to grow. As of Thursday, there were 113 penny stocks — excluding preferred shares and SPACs — listed across the two main markets: 26 on the Kospi and 87 on Kosdaq. The outcome of the current injunction cases is widely seen as the first real test of the penny-stock delisting regime's future direction.


jiyun@heraldcorp.com
moon@heraldcorp.com