Ostem, SillaJen, and Other Bio Stocks Face Delisting Threat, 260,000 Retail Investors 'Anxious'

Ostem Implant Shareholders May Have Funds Locked for 2 Years
Final Decision on ShillaJen Delisting Next Month

Im씨, who embezzled 221.5 billion KRW from Osstem Implant, is being transferred to the prosecution after leaving Gangseo Police Station in Seoul on the morning of the 14th.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Bio companies such as Ostem Implant and SillaJen, whose trading has been suspended, are facing the risk of being delisted from the stock market. Concerns are growing among 'bio retail investors' whose funds are tied up in these stocks.

According to the financial investment industry on the 23rd, it has been identified that there are 260,000 minority shareholders in the bio stocks currently facing increasing delisting concerns. Having invested during the once-booming 'bio stock craze' and now having their funds frozen, they are even prepared to engage in litigation.

Ostem Implant Minority Shareholders May Have Funds Frozen for About 2 Years

First, on the 24th, the Korea Exchange (KRX) is scheduled to decide whether Ostem Implant will be subject to an on-site examination of listing eligibility. If further investigation is needed, the decision can be postponed by 15 business days. Earlier, on the 3rd, Ostem Implant disclosed that an internal finance management employee, Mr. Lee, was suspected of embezzlement in the course of duty. Since the embezzlement amount reached 221.5 billion KRW, exceeding the company's equity capital, grounds for a substantive review of listing eligibility arose.

Given the current situation, it is highly likely that the exchange will determine Ostem Implant as a subject for review. In this case, the trading suspension is expected to be prolonged. If the company submits an improvement plan within 15 days, the exchange will review it within 20 days and forward it to the Corporate Evaluation Committee (CEC). The CEC will decide on one of three options: maintain listing, delist, or grant an improvement period (within one year). If 'maintain listing' is decided, trading will resume immediately; if delisting is decided, the case will move to the KOSDAQ Market Committee for another 20-day review. If an improvement period is granted, trading can be suspended for up to one more year. Depending on the outcome of this review, the trading suspension could last over two years.

Therefore, the investment funds of approximately 20,000 minority shareholders of Ostem Implant could be tied up during this period. As of September 30 last year, Ostem Implant had 19,856 minority shareholders holding 55.6% of the total issued shares of 14,285,717.

If the exchange decides that Ostem Implant is not subject to the substantive review, trading will resume the next day, but a decline in stock price is inevitable. Currently, about 2,000 minority shareholders are preparing to file compensation lawsuits against the company.

Final Decision on SillaJen's Listing Status Next Month

On the afternoon of the 18th, when the Corporate Review Committee was held to examine whether to resume trading of ShillaJen, a KOSDAQ-listed company whose stock trading was suspended due to embezzlement and breach of trust by executives, members of the ShillaJen Shareholders' Union held a rally in front of the Korea Exchange in Yeouido, Yeongdeungpo-gu, Seoul, urging the resumption of trading.
[Image source=Yonhap News]

SillaJen, which once sparked a bio stock frenzy, was decided to be delisted by the Korea Exchange Corporate Evaluation Committee on the 18th. The KOSDAQ Market Committee is scheduled to review and decide by the 18th of next month whether to delist or grant an improvement period.

As of December 31, 2020, SillaJen had 174,186 minority shareholders. They hold a whopping 92.60% (66,253,111 shares) of the total issued shares of 71,542,125.

SillaJen, listed on the KOSDAQ market at the end of 2016, saw its stock price soar on expectations for its virus-based anticancer drug 'Pexa-Vec.' At one point, it ranked second in market capitalization. In 2017 alone, the stock price surged by 606%. During that time, the number of minority shareholders increased by more than 80,000.

However, the stock price plummeted in August 2019 following news of clinical trial suspension. In May 2020, trading was suspended due to grounds for a substantive review of listing eligibility caused by embezzlement and breach of trust by former CEO Moon Eun-sang and other executives. In November of the same year, the CEC granted a one-year improvement period. Nevertheless, the exchange ultimately decided that SillaJen's improvement efforts were insufficient and decided on delisting. Some minority shareholders, unable to accept the exchange's decision, have announced plans to file criminal complaints against the exchange chairman and others.

Kolon TissueGene's Final Delisting Decision on the 9th of Next Month

Kolon TissueGene is expected to have its final delisting decision on the 9th of next month. Previously, Kolon TissueGene was subject to a substantive review of listing eligibility due to controversy over the components of its new drug 'Invossa-K' (Invossa), and its stock trading has been suspended for nearly three years since May 2019.

The KOSDAQ Market Committee's improvement periods granted twice in 2019 and 2020 ended on the 17th of last month. The company submitted its final improvement plan implementation report on the 7th.

As of the end of the third quarter last year, Kolon TissueGene had 64,332 minority shareholders holding 34.5% (4,212,565 shares) of the total issued shares of 12,223,510.

Minority shareholders of Kolon TissueGene have already filed a damage compensation lawsuit against the company and the securities firms that underwrote the listing in July 2019, and the trial is currently ongoing.