Daesung Private Equity triggers reverse split as delisting risk grows in Korea - CHOSUNBIZ - Chosunbiz

Daesung Private Equity Inc. (027830) has called an extraordinary shareholder meeting at which shareholders will vote on amending the articles of incorporation and implementing a reverse stock split that consolidates five common shares, according to the company's disclosure. The move comes as the firm faces increasing delisting risk on the KOSDAQ market. The company, which primarily invests in South Korea with a focus on Seoul, Gyeonggi-do and Chungcheongnam-do, previously announced plans to raise 25 billion won (US$19 million) through a stock offering, according to Yonhap.

The pressure reflects tighter listing rules introduced in July. Under the revised framework, the financial authorities designate companies as issues to be monitored if their share price stays below 1,000 won for 30 consecutive trading days or if they fall short of market capitalization requirements. Companies are delisted if they fail to recover above the threshold for more than 45 consecutive trading days within the following 90 trading days. The authorities framed the changes as part of an effort to revitalize the stock market.

According to a report by An Yu-mi, senior researcher at the Korea Capital Market Institute, reported by Chosunbiz, corporate responses have been widespread. KOSDAQ companies disclosing reverse split decisions reached 220 as of Sept. 4, compared with about a dozen per year previously and 15 for all of last year. Capital reduction decisions rose from 23 in 2022 to 65 as of the same date this year. Of the 60 KOSDAQ firms designated as monitoring targets between July and Sept. 4, 38 cited market capitalization below 20 billion won and 30 cited penny-stock status, and 27 took follow-up measures such as paid-in capital increases, reverse splits, capital reductions or treasury share purchases.

An noted that while reverse splits lifted per-share prices immediately after the change, many companies subsequently saw their share prices decline again. She suggested the government review supplementary measures and assess the effects of the 20 billion won KOSDAQ market capitalization standard and further threshold increases on companies and the market, noting that some firms short of price requirements have relatively sound financial conditions. Coverage of Daesung's specific financial position and the outcome of the shareholder vote was limited in the available sources.