Korean exchange, strengthen measures to prevent low-priced stocks... revise stock consolidation regulations

The Korea Exchange has reissued a revision to the listing regulations aimed at preventing so-called “low-priced stock” evasion behaviors, and has decided to implement the new standards starting July 1, 2026. This move aims to prevent listed companies from formally escaping low-price status through repeated share mergers or capital reductions, while also refining regulatory approaches based on on-site feedback.

On April 17, the Korea Exchange announced that it will once again preview amendments to the listing regulations for the Korea Composite Stock Price Index market and the KOSDAQ market. The core of this adjustment is the management standards targeting low-priced stocks with long-term share prices below 1,000 won. The original preview aimed to prevent companies with share prices below par value from evading low-price stock requirements simply by merging shares to reduce the number of shares, including provisions that if the post-merger share price remains below par value, the company would be delisted.

However, the exchange adopted stakeholders’ opinions and shifted the regulatory focus from outcomes to behaviors. The new plan restricts listed companies designated as low-price stock management categories from completing share mergers or capital reductions within one year of designation. It also addresses cases where a company, within 90 trading days after being designated as a management category, conducts another share merger or capital reduction with a ratio exceeding 10:1. In short, the intention is to prevent listed companies from excessively reducing their share count in the short term and artificially boosting stock prices to evade management standards. This standard applies to share mergers or capital reductions completed after July 1.

The background for reinitiating the preview process is based on feedback collected during the first preview period from April 4 to 10. Due to market participants such as listed companies and investors raising concerns about the effectiveness and predictability of regulation, the exchange has supplemented and improved the system accordingly. Regulations directly impact corporate capital policies and investor protection; if too rigid, they may hinder normal structural adjustments, while if too lenient, managing problematic companies becomes difficult. This revision reflects a careful balance.

The new preview also includes other previously announced enhancements to listing management. These include raising market value standards related to delisting, establishing new low-price stock requirements, introducing semi-annual capital erosion requirements, and strengthening penalties for information disclosure violations. The revised draft will be publicly announced again on the exchange’s official website from now until April 24, and the exchange plans to implement it starting July 2026 after approval by the Financial Services Commission next month. This move may go beyond merely cleaning up low-priced stocks, aiming to strengthen market trust through stricter operational standards for maintaining listings.