[At a Crossroads for Listed Companies] SL Bionics, Reason for Trading Suspension Despite Q3 Return to Profit

[Asia Economy Reporter Jang Hyowon] SL Bionics, a KOSDAQ-listed company, was suspended from trading due to accumulated penalty points despite successfully returning to profitability in the third quarter. The largest shareholder of SL Bionics announced plans to separate ownership and management as a corrective measure following this incident.

According to the Financial Supervisory Service's electronic disclosure on the 14th, SL Bionics was penalized with 38 penalty points and a fine of 152 million KRW by the Korea Exchange (KRX) for failing to disclose within the reporting deadline the collateral provision contracts involving a change in the largest shareholder.

Under KOSDAQ market listing regulations, if the cumulative penalty points exceed 15 within the past year, stock trading is suspended due to a substantive review of listing eligibility. The Exchange is scheduled to decide by the 26th whether SL Bionics will be subject to this substantive review.

The collateral contracts involving the largest shareholder that SL Bionics failed to disclose total nine cases from December 23, 2020, to October 4 of this year. This issue came to light after the Exchange received a report of disclosure violations from a lending company and requested confirmation from the company.

The largest shareholder, SL Holdings Company, stated, "SL Holdings Company is effectively a one-person company led by Director On Youngdoo, and due to ignorance and misunderstanding of disclosure obligations, we were unaware of the omissions. Upon receiving the Exchange's request for confirmation of non-disclosure, we promptly rechecked and completed the correction disclosure."

They further explained, "At the time, we judged that disclosure was not required because the change of the largest shareholder was impossible due to the exercise of collateral rights, and some pledges were canceled as no actual borrowing occurred. However, we have now corrected and disclosed all these cases."

In particular, regarding the lending company that reported the non-disclosure, the largest shareholder said, "This company has a personal joint guarantee debt relationship with the representative of the largest shareholder corporation, On, and has filed multiple lawsuits against the largest shareholder corporation and SL Bionics since last year. However, the company has won all related lawsuits, and it is inappropriate to harm a listed company through personal transactions."

Moreover, SL Holdings Company plans to significantly improve corporate governance if designated for substantive review. Since the penalty points originated from the largest shareholder, they intend to clearly separate ownership and management to prevent such incidents in the future.

The company stated, "We have currently formed an internal review committee composed of external lawyers and accountants and secured management transparency through external legal advisory contracts. The largest shareholder does not participate in company management, and we are thoroughly separating ownership and management by recruiting many talents from LG Innotek as executives."

They added, "Going forward, the company will undergo accounting audits by an external audit firm to ensure all management matters of the largest shareholder corporation are recognized by the company, and all changes in stock holdings will be disclosed. Additionally, we will designate employees who can actively communicate with the largest shareholder and conduct mandatory disclosure education for all employees, along with regular in-house training."

Meanwhile, the Exchange will review the possibility of continued business, financial structure, and governance during the substantive review to decide whether to delist or maintain the listing. SL Bionics posted sales of 6.7 billion KRW and operating profit of 500 million KRW on a separate basis in the third quarter, successfully returning to profitability compared to the same period last year. On a cumulative basis, operating losses were reduced by more than 91% to about 500 million KRW compared to the previous year. This improvement is attributed to the acquisition of eco-friendly energy company Woosung Industry this year and the high value-added product lineup of the LED business division. The debt ratio was also at a healthy level of 49.8% as of the end of the third quarter.