[Edaily Reporter Shin Ha-yeon ] With delisting requirements for so-called “penny stocks”—stocks priced below 1,000 won—taking effect in July, stock consolidations by low-priced companies continue. This involves combining multiple shares into a single share to mechanically raise the price per share. However, critics point out that it is difficult to eliminate the risk of delisting through price adjustments alone, as quite a few companies have seen their stock prices fall back to penny-stock levels after completing the consolidation.

According to the Korea Exchange on the 12th, 19 KOSDAQ-listed companies had announced decisions to conduct stock consolidations as of the 10th of this month. CoAsia CM(196450), #IVISIONWORKS CO.,LTD., CammSys Corp.(050110), ABION Inc.(203400), WooDeumGee Farm Co., Ltd(403490), Sonid(060230), LUMENS CO., LTD.(038060), LK SAMYANG(225190), MOA Life Plus(142760), Victory Contents Co.,Ltd.(210120), Shaperon Inc.(378800), #SERIM B&G, and WINGS FOOT(335870) have joined the ranks of companies undertaking stock consolidations.
Following a surge in consolidation decisions—80 in March, 19 in April, 34 in May, and 36 in June—ahead of the implementation of the delisting system for penny stocks, efforts to “boost stock value” have continued even after the system took effect. Since the start of this year, the number of announcements regarding stock consolidations on KOSDAQ alone has exceeded 200.
A stock consolidation is a method of reducing the number of outstanding shares by combining multiple shares into a single share. For example, if five shares with a par value of 100 won each are consolidated into a single share with a par value of 500 won, the number of outstanding shares is reduced to one-fifth, and the theoretical share price increases fivefold. While the market capitalization and the company’s intrinsic value remain unchanged, this results in a rise in the price per share.
The problem is that there have been repeated instances where the share price increase resulting from the consolidation has not been sustained. In fact, as of July 10, all 13 KOSDAQ companies that completed their par value and stock consolidation and were relisted last month were trading below their relisting reference price. Their average return was recorded at minus (-) 40.5%. #WING YIP FOOD HOLDINGS GROUP saw the largest drop, falling 56.5% from a reference price of 2,970 won to 1,293 won; ORGANIC TEA COSMETICS HOLDINGS COMPANY LIMITED(900300)fell 54.9% from 4,550 won to 2,050 won; and Hyper Corporation(065650)dropped 51.1% from 4,220 won to 2,065 won.
Global SM Tech Limited(900070)Eun fell from its base price of 1,220 won to 1,040 won, while China Crystal New Material Holdings Co., Ltd. dropped from 2,080 won to 1,070 won, bringing both back close to the 1,000-won mark and increasing the likelihood that they will revert to penny stock status. Since the number of shares was reduced without any improvement in business performance or financial structure, the merger effect is bound to disappear quickly if selling pressure continues.
Under the penny stock delisting system implemented this month, a stock is designated as a “monitored stock” if its price remains below 1,000 won for 30 consecutive trading days. If the stock fails to recover to 1,000 won or higher for 45 consecutive trading days within the following 90 trading days, it becomes subject to delisting. Financial authorities and the stock exchange have also blocked attempts to circumvent the rules through simple reverse stock splits. Even if a stock price exceeds 1,000 won after a par value consolidation, the delisting criteria for penny stocks still apply if the price remains below the post-consolidation par value. Market capitalization criteria are also an issue. With the market capitalization threshold raised to 20 billion won starting this month, nine KOSDAQ companies have already been flagged as candidates for “monitored stocks” due to falling short of this requirement.
A securities industry official stated, “A stock consolidation is merely a measure to change the number of shares outstanding and the unit of price display; it is not a measure to improve sales, profits, or cash flow,” adding, “If performance improvements do not follow the consolidation, the stock price could fall again, so investors should examine the company’s financial condition and funding history alongside the consolidation ratio.”
Meanwhile, experts believe that while the delisting of penny stocks is not a factor that will directly boost the index, it will have a positive impact on weeding out troubled companies and enhancing confidence in the KOSDAQ market. Lee Jun-young, an analyst at EUGENE INVESTMENT & SECURITIES, said, “Although the delisting of penny stocks is not a direct factor that will substantially raise the KOSDAQ index, it will have a positive effect on the market’s self-cleansing mechanism and structural improvement.”