It has been found that 88 out of the 196 stocks traded in the Korea Over-the-Counter Bulletin Board (K-OTC BB) were delisted stocks as of June 9. Launched on April 27, the K-OTC BB is a curb market for the trading of the shares of the unlisted corporations, including small and medium enterprises and venture firms. Its original purpose is the diversification of the recovery of investment by venture capital firms.
Before the establishment of the K-OTC BB, the Korea Financial Investment Association ran the Free Board, but failed to boost trading, as blue chips shunned the Free Board for its low entry barrier and heavy public announcement burden, while less promising and delisted companies crowded into it. In order to address the situation, the Free Board was divided into the K-OTC for leading unlisted firms and the K-OTC BB for every unlisted corporation.
However, delisted stocks account for the largest part of the K-OTC BB these days, and experts are pointing out that it is becoming a place where insolvent enterprises dispose of their shares instead of a tool for venture capital attraction. Ten out of 16 and 29 out of 42 asking prices were for the sale and purchase of delisted shares on June 8 and 9, respectively. An imbalance in the market is continuing as well, with few willing to buy the garbage stocks. This month, an average of 140 to 160 offer prices were found a day, but the daily average number of bid prices stood at 60 to 80, with deals made for just 10 or so stocks per day.
Nevertheless, the Korea Financial Investment Association is not seeing the current situation as a problem. “The number of stocks in trading has more than doubled from 75 since the establishment, while the daily trading volume and amount have increased from 1,560 to 113,248, and from 58.7 million won [US$52,626] to 125,939,330 won [US$112,909], respectively,” it explained, adding, “The K-OTC BB includes not only those delisted, but also blue chips and those about to go public, and delisting is not a trading consideration in the K-OTC BB, whose most important principle is to allow the trading of every stock that meets the minimum requirement for the circulation of shares.”