<Summary of delisting in 2014>
According to the Korea Exchange (KRX), the number of delisted companies in the KOSDAQ market was 15 in 2014, a decrease of 54.5% from a year ago period, showing a steady downtrend since 2010. This is only 25% of the 65 companies delisted in 2009, a year when the regulation on listing maintenance review was introduced, indicating that the market soundness has improved significantly on the back of a decrease in unfaithful corporate disclosure.
12 of the 15 companies were delisted since they corresponded to the formal delisting requirements, and the remaining three were delisted by the determination of the Listing Maintenance Review Committee. The companies delisted by the formal delisting requirements have decreased since 2009, and also those delisted by the listing maintenance review has sharply declined from the peak of 28 reached in 2010.
<Features of delisting>
A total of 211 companies have been delisted by the formal delisting requirements since 2009. Among them, 88 were delisted on account of unfavorable opinions presented by external auditors indicating opaque accounting, and 44 due to capital impairments accompanying an unstable financial status associated with deteriorating profitability and failure in capital expansion.
Of the 82 companies delisted by the listing maintenance review, 37 were owing to misappropriation and malpractice, and 11 were due to fraudulent accounting.
Due to the limitation of pre-existing business model etc., delisted companies recorded the average sales of KRW 33.5 billion and the average net loss of KRW 22.7 billion, compared to the average sales of KRW 120.1 billion and the average net profit of KRW 3.4 billion posted by the KOSDAQ listed companies. In addition, changes in major shareholders and unfaithful disclosure occurred 2.2 and 1.9 times, respectively, due to the weak corporate governance of delisted companies during the two-year period prior to delisting.
<Reasons reducing delisted companies>
Overall market quality has been enhanced since 2009 by listing 302 new companies with growth potential and delisting 293 marginal companies. In line with this, the number of corporate disclosures related to business failure and administration measures taken by the KRX have decreased. Currently, the number of companies listed in the KOSDAQ market is at 1,046, which is the highest figure ever recorded since the market launch.
Effective policies aimed at protecting investors led to the reduction of delisting. Early exit of 82 marginal companies based on the regulations of listing maintenance review (2009) and back door listing (2011) contributed to the soundness of the market. The regulation on the back door listing prohibited the unqualified companies intending to play a money game from being listed. Accounting inspection by the authorities concerned also resulted in the reduction of cases delisted on account of auditors’ opinion and fraudulent accounting. The KRX strengthened the disclosure regulations regarding the lending of large amount of funds and change of management. The KRX also introduced the regulation on the investment alert that is issued to raise investors' awareness of risky companies.
Recently, the KOSDAQ-listed companies have been active in M&As to sharpen their competitiveness under the M&A supporting policy. For example, Kakao acquired a growth engine through listing in the KOSDAQ market after merger with Daum.
Gaining investors' confidence through a stable operation of the KOSDAQ market seems crucial, given the dynamics of the market and the reality of listed companies. To prevent delisting, the KRX has promoted education and guidance programs for companies in the KOSDAQ market.
<Plan>
The KRX will continue to improve the soundness of the KOSDAQ market by inviting promising companies with growth potential, while taking strict disciplinary actions including expelling any companies that disturb the soundness of the market. The KRX will maintain strong regulations on the issues regarding investor protection by taking into account the features of delisting, while actively seeking to support corporate restructuring by relaxing regulations that are extremely strict on companies. Also, the KRX will assist companies to be equipped with capabilities for corporate disclosure by having in place education programs and manuals.
FTSE Mondo Visione Exchanges Index:
KRX: Quality Improvement In The KOSDAQ Market Regarding Delisting
Date 30/12/2014