(Bloomberg) -- South Korea is tightening rules for companies to stay listed, as part of a broader attempt to improve the quality of the stock market.
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The market capitalization requirement for stocks to remain on the main Kospi exchange will be raised from 5 billion ($3.45 million) to 20 billion won starting 2026, and to 50 billion won from 2028, according to the Financial Services Commission. The improvement period granted to Kospi firms after a delisting warning — currently as long as four years — will also be halved to accelerate the process.
Regulators have been striving to revive the stock market, with the most significant attempt being the “Corporate Value-Up” program to boost share valuations. While stocks have struggled in 2024 largely due to the poor performance of market heavyweights like Samsung Electronics Co., Tuesday’s announcement aims to tackle structural problems such as delisting conditions that have been too lenient.
Firms with a market cap below 100 billion won will also face higher minimum revenue requirements, which is currently 5 billion won. The government will seek a gradual increase to take the threshold to at least 30 billion won starting 2029.
“Delays in the delisting of low-performing companies have led to inefficiencies in capital allocation and have undermined market trust, also negatively affecting equity indexes,” the FSC statement said. The government is strengthening the criteria to “remove low-performance companies effectively and contribute to a ‘value up’ of the market.”
The current rule, with its low financial requirements, has failed to kick out zombie firms. No stock has been delisted over the past decade by falling below the market cap or revenue threshold, the FSC said. Based on 2024 data, 62 Kospi members and 137 Kosdaq firms fail to meet the strengthened standards, accounting for about 7%-8% of each market, according to the regulator.
The government also wants to avoid huge price swings following initial public offerings. By 2026, companies should allocate at least 40% of the shares to institutional investors that pledge a lock-up period, the statement said. Those who vow to hold shares for longer will be given an advantage in allocations.