'Sound of Memories'... What Exactly Caused Its Stock Market Delisting After 20 Years?

[Asia Economy Reporter Lee Seon-ae] Soribada, a dominant player in the domestic music streaming service market in the early 2000s, is finally being delisted from the stock market. Soribada, which entered the market through a backdoor listing on the KOSDAQ in 2001 during the peak of MP3 file sharing services, is leaving the market after 20 years.

According to the Korea Exchange on the 27th, the organized trading for Soribada, a KOSDAQ-listed company, will begin on the 29th, and the company will be delisted on September 7. On the 25th, Soribada announced that the court dismissed its injunction request to suspend the effect of the delisting decision.

Earlier in May, the Korea Exchange finalized the decision to delist Soribada. Initially, organized trading was scheduled from June 3 to June 14, with delisting planned for June 15. However, as Soribada filed an injunction to suspend the delisting decision with the court, the organized trading was postponed.

The delisting of Soribada is due to a refusal of audit opinion. In May last year, the audit opinion for the 2020 fiscal year was a 'disclaimer of opinion' due to limitations in the audit scope, which triggered the delisting cause. The company was designated as a management item and trading was suspended. Since the refusal of audit opinion was not resolved until the following year, delisting was decided.

Industry insiders say various disputes hindered the delisting process. First, Soribada continuously faced conflicts with record producers. Soribada, which first appeared in 2000, expanded its business by sharing music in MP3 file format through P2P (peer-to-peer) file sharing. However, the problem was that it provided a service allowing free sharing without properly paying for music file copyrights. As telecom companies’ music services (currently Melon, Genie Music) and Bugs (NHN) dominated the market, Soribada’s business declined. After being penalized by the court for copyright infringement, it switched to a legal service in 2007. Despite introducing paid music services and paid subscription systems, it could not avoid deficits.

Management disputes also held the company back. From 2020, a management rights dispute continued between J-Mason and Joongbu Corporation. Initially, the actual controlling shareholder J-Mason intended to sell Soribada to Joongbu Corporation, but differences arose, and lawsuits related to the management dispute continued from April 2020. Conflicts between the existing management (J-Mason) and the new largest shareholder (Joongbu Corporation) escalated, and shareholder meeting agendas to resolve the issue repeatedly failed due to lack of quorum, increasing confusion.

Although the management dispute was temporarily resolved after Joongbu Corporation sold some of its shares last year, the already damaged company could not escape the deficit trap. Efforts such as capital reduction, finding new major shareholders, and conducting a paid-in capital increase were made, but the company posted deficits for five consecutive years on a separate basis, leading to the delisting crisis. Consequently, the company received a disclaimer of audit opinion for the 2020 fiscal year and was designated as a management item in May last year.

Meanwhile, with Soribada’s delisting, the damage to 20,000 minority shareholders seems unavoidable. As of the end of June, Soribada had 21,036 minority shareholders holding 55.26% of the shares. They will have the last chance to trade their shares during the organized trading period from the 29th to September 6, but even if they sell all their shares during this period, they will not be able to recover the purchase price. The organized trading system provides a final opportunity to trade shares of delisted stocks. During this period, existing Soribada shareholders can sell their shares to minimize losses, although they cannot recover the original purchase price.