Adrian Donian, 22, and Emile du Plessis, 24, were arrested in September 2016, after they broke into Bayworld oceanarium in Port Elizabeth and snatched "Buddy", an endangered African black-footed penguin.
The magistrate said he had dropped the case because the prosecuting authority had taken too long to decide whether to prosecute the two or not.
Their lawyer, Craig de Lange, had argued that the two be placed in a "rehabilitation programme because they are students and not hardcore criminals".
The animal was wrapped in a shirt and bundled in a car during a nighttime raid.
He was then taken to the coast where he was released into the Indian Ocean.
Officials at the centre had raised concerns that the three-year-old penguin who had lived most of his life in captivity would not survive in the open ocean.
Security camera footage showed the men entering the penguin enclosure and taking selfie photographs before stealing Buddy and later releasing him at the nearby Pollock Beach.
"They believe animals should not be kept in captivity and so they thought they were doing the right thing by releasing the penguin into the wild," said de Lange.
Buddy has never been found since the incident.
African black-footed penguins, also known as jackass penguins due to their braying noise, have been rated as endangered since 2010 after suffering from commercial fishing and shortage of prey.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)