Former Management Followed by Additional Reasons for Substantial Review of Listing Eligibility... Investors Frustrated
[Asia Economy Reporter Oh Ju-yeon] Since the market close on May 4, the resumption of trading for SillaJen, whose stock trading has been suspended, is becoming increasingly uncertain. Initially, it was expected that trading could resume from the end of this month, when the decision on whether SillaJen would be subject to a delisting suitability review due to embezzlement and breach of trust allegations against the former management would be made. However, before a conclusion was reached on the previous embezzlement and breach of trust allegations, new embezzlement and breach of trust allegations against the current management have arisen, adding further grounds for the delisting suitability review.
If it is decided that SillaJen is not subject to the delisting suitability review due to the embezzlement and breach of trust allegations, the stock trading suspension will be lifted. However, with the additional embezzlement and breach of trust allegations this time, it seems unlikely that it will be decided that SillaJen is not subject to the review.
According to the Financial Supervisory Service’s electronic disclosure system on the 4th, SillaJen disclosed at 6:32 p.m. after the market closed that day that the current CEO is under suspicion of embezzlement and breach of trust. This is a separate case from the indictment related to the embezzlement and breach of trust allegations against the former management disclosed on May 8. At that time, the amount involved in embezzlement was 194.748 billion KRW, which was 344.20% of the company’s equity capital.
SillaJen’s stock trading has already been suspended since 5:43 p.m. on May 4 due to the occurrence of grounds for the delisting suitability review. The Korea Exchange KOSDAQ Market Division initially stated that trading would be suspended only until 30 minutes after the disclosure following the inquiry, but changed the suspension period to last until the decision on whether the company is subject to the delisting suitability review. The decision date on whether SillaJen was subject to the review was May 29, within 15 days of the occurrence of the grounds, but the investigation period was extended. The Exchange stated, "Considering the need for additional investigation to decide whether SillaJen is subject to the delisting suitability review, we plan to decide by the 19th of this month and provide guidance on whether the trading suspension will continue or be lifted."
Meanwhile, new embezzlement and breach of trust allegations have arisen, adding further grounds for the delisting suitability review. This concerns breach of trust by the current CEO following the former management. SillaJen confirmed that the Seoul Southern District Prosecutors’ Office has filed an indictment against the current CEO for violations of the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust), breach of trust in the course of business, and attempted breach of trust in the course of business. The amount involved in embezzlement is approximately 220.634 billion KRW, exceeding the amount involved in the former management’s breach of trust. This corresponds to 389.95% of the company’s equity capital.
Investors are outraged as the current CEO’s embezzlement and breach of trust add new grounds for the delisting suitability review in addition to the existing case. One investor said, "I believed in the value of PexaVec and was holding on despite the sharp drop in stock price, thinking it would recover someday. However, former and current executives committed embezzlement and breach of trust amounting to thousands of billions of KRW, resulting in investment losses exceeding 90%, and I am anxious because I don’t even know when trading will resume."
The Exchange is currently reviewing whether SillaJen is subject to the delisting suitability review regarding the previous embezzlement and breach of trust case. Although there are two cases of embezzlement and breach of trust, it is more likely that the Exchange will consider them together rather than separately when making a decision.
An Exchange official said, "There are two separate embezzlement and breach of trust cases involving former and current management, but since the review to decide whether SillaJen is subject to the delisting suitability review was already underway, these two cases may be consolidated for the decision."
If SillaJen is determined to be subject to the delisting suitability review on the 19th, it will undergo a substantive review for up to 35 days while trading remains suspended. This period combines the submission period for the company’s improvement plan (15 days) and the deliberation and resolution period of the Corporate Delisting Committee (20 days). Through the committee’s deliberation and resolution, a decision will be made to maintain listing, grant an improvement period, or delist the company.
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