[Click eStock] 'ESG Risk' Osteem Implant, Target Price Downgraded

[Asia Economy Reporter Hwang Junho] The target price of Osstem Implant, which experienced an embezzlement case worth approximately 188 billion KRW, has been downgraded to 140,000 KRW. Due to insufficient monitoring systems leading to a large-scale embezzlement incident, ESG risks have increased, and there is an analysis that further stock price declines are possible due to decreased trust in the company.

Seogeunhee, a researcher at Samsung Securities, stated, "Since the embezzlement amount is large relative to equity capital, the actual review will likely depend on the possibility of fund recovery," adding, "Considering the company's sustainability and investor protection, the possibility of delisting is judged to be low."

Currently, Osstem Implant's stock trading is suspended. After the company announced on the same day that it filed a complaint against employee Lee, who managed funds, on charges of embezzlement worth approximately 188 billion KRW, the Korea Exchange suspended stock trading of Osstem Implant from 8:35 AM on the same day until a decision is made regarding the suitability review for continued listing.

The Exchange viewed that the embezzlement charge (amounting to 188 billion KRW) corresponds to 92% of the company's equity capital as of the end of 2020 on a separate basis, triggering grounds for a suitability review for continued listing. Accordingly, the resumption of Osstem Implant's trading will be determined within 15 business days (by the 21st of this month) based on the outcome of the suitability review.

The company stated, "This case involves embezzlement conducted solely by a fund management employee, and a complaint was filed with the Seoul Gangseo Police Station on December 31 of last year," adding, "We plan to take all necessary measures to recover the funds through proper legal procedures."

However, researcher Seo noted, "ESG risks have increased due to insufficient monitoring systems, and the stock price may decline due to lowered company trust," adding, "If account freezing is possible, the embezzled amount can be recovered, but if some recovery is insufficient, it may be reflected as non-operating losses this year. Therefore, the recovery of embezzled funds will be crucial for the stock price direction."

Researcher Seo further stated, "We are downgrading Osstem Implant's investment opinion to neutral and adjusting the target price to 140,000 KRW," adding, "Future changes to the investment opinion and target price will depend on the scale of embezzled fund recovery and whether systems to prevent recurrence of embezzlement are established."