Despite Hwail Pharmaceutical Fatal Accident, Kumho HT Only Cares About Stock Price②[Listed Companies at a Crossroads]

[Image source=Yonhap News]

[Asia Economy Reporter Jang Hyowon] Kumho HT has been found to have distributed a press release aimed solely at managing its stock price, without any expression of condolence or apology to the deceased and their bereaved families, despite a fatal fire accident occurring at Hwail Pharmaceutical. Kumho HT is the largest shareholder of Hwail Pharmaceutical, and affiliates of Chairwoman Jo Kyungsook also hold a large number of Hwail Pharmaceutical shares.

On the 30th, a fire accident occurred at Hwail Pharmaceutical’s Sangsin-ri factory, resulting in one employee’s death and 16 injuries. In response, on the 4th, PR agency A distributed a press release titled “Hwail Pharmaceutical, Fire Accident ‘Likely No Significant Impact on Sales... Doing Our Best for Recovery and Prevention of Recurrence.’”

The release included information about the sales scale of the Sangsin-ri factory where the fire occurred and that the company had fire insurance to minimize losses. The content was solely focused on stock price management, with no apology or mention of the deceased or injured due to the fire.

The party distributing this release was Kumho HT, the largest shareholder of Hwail Pharmaceutical. The A agency stated that Hwail Pharmaceutical requested Kumho HT to distribute the press release due to manpower shortages caused by accident recovery. However, once the investigation began, the agency changed its statement, saying it received the press release from Hwail Pharmaceutical.

As of the end of the first half of this year, Kumho HT holds a 15.87% stake in Hwail Pharmaceutical. Affiliates S-Mac and Oseong Advanced Materials hold 8.32% and 5.01%, respectively. The corporate governance structure is formed as Chairwoman Jo Kyungsook → Oseong Advanced Materials → S-Mac → Kumho HT → Hwail Pharmaceutical.

Chairwoman Jo first acquired Hwail Pharmaceutical shares in September 2020 through her affiliate Dynona. At that time, she purchased 1,599,889 shares (9.25%) at 19,272 KRW per share. Subsequently, through a third-party allotment paid-in capital increase, an additional 2 million shares were acquired at 10,010 KRW per share. Dynona has since merged with Kumho HT, and these shares are now held by Kumho HT.

Additionally, Oseong Advanced Materials and S-Mac acquired 660,377 and 1 million shares, respectively, through third-party allotment paid-in capital increases in December 2020 and January last year. The per-share prices were 10,600 KRW and 11,400 KRW. Afterwards, Hwail Pharmaceutical conducted a bonus issue, lowering the average price of these shares to approximately 3,000 KRW. Oseong Advanced Materials further participated in a paid-in capital increase in March, purchasing an additional 1,428,572 shares at an issue price of 2,100 KRW.

Furthermore, former major shareholder Crystal Genomics sold 3 million shares to Topazio, Anello, Bledor, and Iasis New Technology Associations, which are also reportedly related to Chairwoman Jo. These associations adjusted their stakes to around 3-4% to evade disclosure regulations.

The purchase prices of Hwail Pharmaceutical shares acquired by Chairwoman Jo’s affiliates are estimated to be in the 2,000 to 3,000 KRW range. However, Hwail Pharmaceutical’s market price fell more than 8% intraday after the fire, dropping to 1,840 KRW. As of 12 PM that day, the stock price remained weak, trading in the 1,900 KRW range.

Regarding this, a Hwail Pharmaceutical official stated, “Due to many inquiries from shareholders about sales, we hastily distributed the press release,” and added, “A condolence and apology message for the deceased has been posted on the company’s website.”

Meanwhile, Hwail Pharmaceutical is a raw material pharmaceutical manufacturer. The Ministry of Employment and Labor has declared the Hwail Pharmaceutical fire accident as an incident subject to the Serious Accident Punishment Act and has also launched an investigation into possible violations of the Industrial Safety and Health Act.