[Edaily Reporter Shin Ha-yeon ] As the KOSDAQ market begins to strictly enforce stricter listing maintenance criteria, market caution is growing regarding “penny stocks” trading below 1,000 won. However, some point out that since there are quite a few penny stocks that generate operating profits or meet certain size requirements, one should not simplistically equate “low-priced stocks” with “failing companies.”

◇Even Profitable Companies Face Delisting Pressure Due to “Penny Stock” Stigma
According to the Korea Exchange and the financial investment industry on the 20th, based on that day’s closing prices, there were 113 stocks on the KOSDAQ market trading below 1,000 won, excluding those designated as “stocks under supervision” or “stocks requiring investor caution.” Of these, 36 were listed in the “Blue-Chip” or “Mid-Cap” segments and had a market capitalization of 30 billion won or more. This means there are quite a few stocks that, while classified as “penny stocks” based on price, cannot simply be viewed as struggling companies in terms of market classification or corporate scale.
In fact, some penny stocks cannot be simply classified as distressed companies based on their performance or corporate size. For example, Han Kook Capital Co., Ltd.(023760)had a stock price of just 708 won but is classified in the Blue-Chip Sector with a market capitalization of approximately 223.5 billion won. Its consolidated operating profit over the past three years has also increased, reaching 82.1 billion won, 96.9 billion won, and 127.9 billion won, respectively. INZI DISPLAY COMPANY LIMITED(037330) Similarly, although its stock price is 926 won—qualifying it as a “penny stock”—it is classified in the “Blue-Chip Companies” category and posted consolidated operating profits of 5.3 billion won, 10.9 billion won, and 17.1 billion won over the same period. This is why some point out that it is difficult to judge a company’s sustainability based solely on price.
Share price levels can vary not only based on corporate fundamentals but also on par value, the number of shares outstanding, and the history of capital increases. Even among companies with the same market capitalization, the share price may be lower if the number of issued shares is high, and companies where the number of shares has increased due to frequent paid-in capital increases or the conversion of convertible bonds (CBs) are also likely to become low-priced stocks. This is why some point out that there are limitations to judging business sustainability based solely on price.
Penny stocks are designated as “monitored stocks” if their share price remains below 1,000 won for 30 consecutive trading days; if they fail to recover to 1,000 won or higher for 45 of the subsequent 90 trading days, delisting proceedings are initiated. Similar to failing to meet the market capitalization requirement, this is a formal ground for delisting against which no separate appeal is possible; therefore, if a company meets the criteria, the decision to delist is made based on quantitative standards without a substantive review of its performance or growth potential.
Professor Jeong Do-jin of the School of Business Administration at Chung-Ang University stated, “Just as a company’s performance and assets are separate issues, it is not appropriate for the KOSDAQ market to treat all penny stocks as candidates for delisting.” He continued, “I believe we need to distinguish companies that have corporate value and sustainability but are undervalued due to supply and demand dynamics in the capital market,” adding, “Even among penny stocks, if a company’s return on assets (ROA) exceeds its cost of capital, it demonstrates sustainability—and we need to examine whether it is appropriate for such companies to be delisted.”
The burden is also growing for KOSDAQ-listed companies on the ground. One industry official noted, “The government’s stance is that if a stock price is low, companies should do whatever it takes—including investor relations (IR)—to raise it,” but added, “However, even if a company consistently generates profits, if it operates in a sector that has fallen out of the market’s spotlight or is a small-cap firm, investors show no interest even with IR efforts. Furthermore, for companies based in regional areas, traveling to Seoul to conduct IR activities imposes a significant burden in terms of both time and cost.”
There are also calls for a complementary mechanism that looks not only at market capitalization or stock prices but also at financial health, technological capabilities, and growth potential. Another industry official stated, “If a company’s market capitalization falls below a certain threshold, it should be required to present a value-enhancement plan to boost its corporate value, and we need to examine whether the problem lies in its finances or if it is struggling despite being financially sound.” He added, “I hope the system will be refined so that companies failing to fulfill their duties as listed entities are delisted, while those with growth potential are allowed to list.”
◇Need for Weeding Out Underperforming Companies… The Key Is Sophisticated Management
Of course, there is significant opposition arguing that the cleanup of penny stocks and low-market-cap companies is necessary. It is true that there has long been criticism that lax oversight following KOSDAQ listings has led to an increase in “zombie companies,” and critics argue that allowing exceptions to the system could actually render the delisting criteria ineffective. Lee Chang-min, a professor in the Department of Business Administration at Hanyang University, pointed out, “Based on past patterns, there have been far too many cases where broad exceptions rendered the very purpose of the system ineffective,” adding, “I believe that unless we take a firm stance on KOSDAQ issues, we will not be able to resolve the fundamental problems of delisting troubled companies and restoring market confidence.”
Ultimately, the key lies in the detailed operational procedures for distinguishing between insolvent companies and those with potential for recovery. Professor Jeong Do-jin remarked, “If delisting is based on supply and demand in the capital market rather than on fundamental criteria, the responsibility of the government or the exchange—which operates the capital market—is being shifted onto the companies.” He added, “If sophisticated experts are involved, they will be able to set conditions and make quantitative judgments even regarding penny stocks.” He continued, “While it is appropriate for the government to formulate policy, implementation should be left to experts,” adding, “Only by having experts handle implementation while the government proposes the policy can we minimize adverse effects.”