Small Shareholders Hit Hard by Osstem Embezzlement Scandal... Dongjin Semichem Also Affected

[Asia Economy Reporter Song Hwajeong] The securities market is in turmoil as the largest embezzlement case in history among listed companies has erupted at the beginning of the new year. Ostem Implant, where the embezzlement occurred, has had its trading suspended, delivering a shock to individual investors, and the fallout has spread to Dongjin Semichem, where the embezzling employee is reported to have purchased stocks.

According to the Korea Exchange on the 4th, the exchange will decide within 15 days whether Ostem Implant, where the embezzlement occurred, will be subject to a substantial review. The exchange suspends trading if the embezzlement amount exceeds 5% of the company's equity capital and decides whether to include the company in the delisting substantial review. The exchange explained, "If the company is subject to a substantial review, we will notify the company and guide the procedures related to the Corporate Evaluation Committee's deliberation and resolution. If not subject to the review, we will guide the lifting of the trading suspension." Accordingly, Ostem Implant's trading will be suspended until the decision on whether it is subject to the listing eligibility substantial review is made. The previous day, Ostem Implant disclosed that it had filed a complaint against employee Lee, who managed funds, on charges of embezzlement. The embezzlement amount is approximately 188 billion KRW, accounting for 91.81% of equity capital. This is the largest embezzlement amount in the history of listed companies.

The fallout spread to Dongjin Semichem as the embezzling employee is presumed to be the same individual as the individual investor who traded a large volume of Dongjin Semichem shares last year. This is because the name, date of birth, and other details match those of Mr. Lee (45), who attracted attention by purchasing a 7.62% stake (3,917,431 shares) in Dongjin Semichem in October last year, and the timing of the embezzlement coincides with the investment period. Following this news, Dongjin Semichem's stock plunged 8.43% the previous day. Notably, foreign investors sold Dongjin Semichem shares worth 52.5 billion KRW, making the largest net sales. In contrast, individual investors net purchased Dongjin Semichem shares worth 76.2 billion KRW, ranking third after Samsung Electronics and SK Hynix. If the embezzling employee and the investing super individual investor are the same person, concerns that the shares held by this super individual investor will be sold to recover embezzled funds negatively affected the stock price. This super individual investor reportedly sold Dongjin Semichem shares for about a month starting November last year and currently holds 1.07%.

Individual investors who invested in Ostem Implant were hit hard as trading was suspended overnight. As of the third quarter of last year, there were 19,856 small shareholders of Ostem Implant, holding 55.6% of the shares.

The securities market views the possibility of Ostem Implant's delisting as low. Geunhee Seo, a researcher at Samsung Securities, said, "The maximum period for the listing eligibility substantial review is 15 business days, so it will be possible to confirm whether the review will proceed by the 21st. Given the large embezzlement amount relative to equity capital, the decision on the review will depend on the possibility of fund recovery. Considering the company's continuity and investor protection, the possibility of delisting is low."

With the trading suspension of Ostem Implant, the number one domestic company, competitors' stock prices are showing strength, resulting in a spillover benefit. As of 10:10 a.m. on the day, Dentium was up 5.83% and Dentis rose more than 9% compared to the previous day.