South Korean financial authorities are set to significantly tighten delisting criteria for companies listed on the Korea Composite Stock Price Index (KOSPI), raising the market capitalization threshold by up to tenfold for the first time in 16 years.
By 2029, companies with a market capitalization below 50 billion won (around $34.9 million) or annual sales under $20.9 million will be gradually removed from the KOSPI stock exchange. Additionally, companies that receive a “qualified,” “adverse,” or “disclaimer of opinion” audit opinion for two consecutive years will face immediate delisting.
Authorities also plan to change the rules for initial public offerings (IPOs) to stop institutional investors from engaging in short-term trading. By requiring them to hold IPO shares for a longer period, the government hopes to prevent situations where demand spikes before listing but share prices drop immediately afterward.
The Financial Services Commission, the Korea Exchange, and the Korea Financial Investment Association unveiled these measures during a joint seminar on Jan. 21. Financial Services Commission Chairman Kim Byung-hwan said the IPO market’s excessive focus on short-term profits and the lax enforcement of delisting rules have hurt the credibility and efficiency of the capital market. “This reform is intended to provide a pivotal moment for upgrading the capital market,” Kim noted.
Currently, KOSPI companies are delisted if their market capitalization or annual sales fall below around $34.9 million. For KOSDAQ companies, the thresholds are $27.9 million for market capitalization and $20.9 million for annual sales. However, these lenient standards have meant no companies have been delisted for failing to meet these thresholds over the past decade.
Under the revised rules, by 2029, companies on the KOSPI will face delisting if their market capitalization drops below $349 million or their annual sales fall below $209 million. For the KOSDAQ, the limits will be $209 million and $69.8 million, respectively.
If applied today, the new criteria would lead to the delisting of about 8% of KOSPI-listed companies (62 out of 788) and 7% of KOSDAQ-listed companies (137 out of 1,530). However, companies with high growth potential, defined as having market capitalizations above $698.1 million for KOSPI or $418.9 million for KOSDAQ, will be exempt from the sales threshold.
Starting this year, any company listed on KOSPI or KOSDAQ that receives a non-standard audit opinion—such as “qualified,” “adverse,” or “disclaimer of opinion”—will be delisted immediately.
Authorities are also targeting the practice of institutional investors selling IPO shares immediately after listing, which has distorted the IPO market. According to the Financial Services Commission, institutional investors recorded net selling on the listing day for 74 out of 77 IPOs in 2024. Critics have pointed out that these investors often inflate company valuations before the listing and then sell off the shares quickly, disrupting fair price formation.
To address this, starting next year, at least 40% of shares allocated to institutional investors in IPOs must be subject to mandatory holding commitments of 15 days to six months, doubling the current average commitment of 20%. If underwriters fail to meet this threshold, they will be required to purchase 1% of the IPO shares themselves and hold them for six months. A financial authority official explained that this rule is intended to ensure underwriters exercise greater caution during the IPO process.
Additionally, stricter eligibility criteria will be introduced for institutions participating in demand forecasts to curb excessive speculation. In 2023, the average number of institutional participants in demand forecasts reached 1,871 per IPO, a figure critics say has fueled overheated bidding and speculative trading.
