402 Firms Fail KOSDAQ Listing Test

According to a Dong-A Ilbo mock registration review on all of the 831 listed companies on KOSDAQ, based on last year’s performance, 48% or 402 companies failed to pass the test.

In order to be listed on KOSDAQ, companies should be free of capital erosion, record a current surplus, and meet the ROE and net profit standards set by industry.

Among the 831 companies, however, 199 companies recorded current deficits, 75 companies had capital erosion and 128 companies failed to meet the ROE and net profit standards.

As the aforementioned three conditions are the most basic ones, more companies are expected to fail, in case of a real registration review. In a real registration review, companies must pass a “qualitative review” which comprehensively addresses marketability, profitability, debt ratio, and technological competitiveness.

As such, while there are plenty of ailing companies in the KOSDAQ market, the number of delisted companies has decreased, which is blamed as a factor that aggravates confusion in the stock market.

According to the Korea Exchange, only four companies were delisted from KOSDAQ this year, a significant decrease from 23 during the same period last year.

It is because an increasing number of ailing companies survived by exaggerating their sales at the last minute through taking advantage of the system’s loopholes or increasing capital through irregular means.

Ailing companies are delisted mostly in April when there are account settlements for the year ending the previous December.

This year, there were 10 KOSDAQ-listed companies whose trading were suspended as they were close to delisting due to sluggish sales, capital erosion, and disclaimers of opinion. However, six companies survived thanks to their strong performances at the last minute.

Wan-Bae Lee roryrery@donga.com