[At a Crossroads: Listed Company] BumLG Family Chairman Koo Bon-ho Earns 4.3 Billion Won in One Year from UCI... Company Issues 'Disclaimer of Opinion' ①

[Asia Economy Reporter Jang Hyowon] It has been revealed that Koo Bon-ho, chairman of Pantos Holdings from the LG conglomerate, invested 13 billion KRW in the KOSDAQ-listed company UCI and earned a profit of 4.3 billion KRW within one year. Meanwhile, during the same period, UCI's stock price plummeted by about 60%, and its performance also deteriorated.

◆ 13 billion KRW investment returns 17.3 billion KRW in one year... 33% profit

According to the Financial Supervisory Service's electronic disclosure on the 3rd, Pantos Holdings and Chairman Koo Bon-ho, the largest shareholders of UCI, signed a contract on the 3rd of last month to transfer 5,952,380 shares (16.8%) at 2,150 KRW per share, totaling 12.8 billion KRW, to UCI CEO Kim Byung-yang and others.

Chairman Koo became the largest shareholder of UCI through a third-party paid-in capital increase on July 5 last year. At that time, UCI conducted a capital increase worth 30 billion KRW, and Pantos Holdings and Chairman Koo invested 13 billion KRW to acquire 7,738,094 shares (23.4%). The price per share at that time was 1,680 KRW.

Chairman Koo is the grandson of the late Koo Jung-hoe, the second brother of Koo In-hoe, the founder of LG Group, and the sixth cousin of the late Chairman Koo Bon-moo. He was once called the "Midas touch" in the market in the mid-2000s but was also imprisoned in 2008 on charges of stock price manipulation.

Although Chairman Koo became the largest shareholder of UCI, he did not exercise direct management rights. On July 12 last year, Chairman Koo signed a contract delegating all voting rights of his shares to CEO Kim Byung-yang.

After the one-year lock-up period ended, Chairman Koo and Pantos Holdings began selling shares on the market starting in July. From July 23 to August 14, Chairman Koo and Pantos Holdings sold a total of 1,785,714 shares on the market at prices ranging from 2,300 to 2,700 KRW per share. The total sale price was about 4.5 billion KRW.

When the balance payment for the block deal contract with CEO Kim Byung-yang is made on the 15th, Chairman Koo will have received 17.3 billion KRW from his 13 billion KRW investment within one year, realizing a 33% profit.

◆ Stock price down 60%... Company designated as ‘Managed Item’

However, UCI's stock price declined over the year. On the closing price basis on July 5 last year, when Chairman Koo became the largest shareholder, UCI's stock price was 6,600 KRW. This was because the stock price surged from the 1,800 KRW range after the announcement of a 30 billion KRW capital increase on June 13. The stock price has dropped more than 59% over about one year, falling to around 2,700 KRW as of the date.

Not only the stock price but the company was also designated as a ‘Managed Item.’ This was because it received a disclaimer of opinion in the first half report this year. The reason for the disclaimer was that the audit firm could not verify transactions such as fund lending and recovery with subsidiaries, affiliates, and related parties of UCI.

According to the company, there is a U.S. subsidiary of BioX, an affiliate, but due to the COVID-19 situation, related documents could not be submitted. UCI acquired a 43.8% stake in BioX for 28.5 billion KRW in March this year.

Performance also collapsed. As of the end of the first half of this year on a consolidated basis, UCI recorded an operating loss of 3.1 billion KRW and a net loss of 6.1 billion KRW. The deficit widened by 228% and 400%, respectively, compared to the same period last year.

The main reasons for the performance decline were poor performance of subsidiaries and high allowance for doubtful accounts. Last year, UCI acquired five companies, bringing the total number of subsidiaries to eight. As of the first half of this year, seven of these subsidiaries recorded losses, and one had no profit at all.

Also, UCI has short-term loans of 10.8 billion KRW, of which 7.3 billion KRW was set as an allowance for doubtful accounts. An allowance for doubtful accounts is an amount set aside in the books in advance for loans that are highly likely to be uncollectible. Approximately 70% of the loaned amount is classified as likely to be uncollectible.

About half of the short-term loans were lent to subsidiaries and related companies. Loans to subsidiaries last year amounted to 4.7 billion KRW, more than four times the 1 billion KRW of the previous year.

A UCI official said, "The BioX case is one of several reasons for the disclaimer of opinion," and added, "We will try to resolve the reasons for the disclaimer by the end of this year."