"Verify False Information First"... Financial Supervisory Service Requests Data from MBK-Koryo Ahn

Under Legal Review for Market Manipulation Violation
"Thorough Investigation on Both Sides"

Lee Bok-hyun, Governor of the Financial Supervisory Service. [Photo by Yonhap News]

The Financial Supervisory Service (FSS), which has launched an investigation into unfair trading related to the tender offer for Korea Zinc, plans to request submission of materials related to the tender offer from MBK Partners, Young Poong, and Korea Zinc. This is to verify whether there have been violations of the Capital Markets Act, such as market manipulation or disruption of market order.

According to the FSS on the 8th, the Investigation Bureau has begun a legal review to determine whether unfair trading activities occurred regarding the official statements made by the parties involved during the Korea Zinc tender offer process.

A senior FSS official stated, "We will first investigate whether there are any falsehoods in the claims made by both sides during the tender offer process," adding, "We are reviewing whether there have been violations of the Capital Markets Act, including fraudulent trading and disruption of market order." He continued, "While the tender offer itself is not problematic, we need to consider whether excessive competition is truly desirable for investors and the market."

The unfair trading investigation will begin by verifying the presence of any falsehoods among the claims made by both parties. According to Article 178 of the Capital Markets Act, the law can be applied even if there is no proven intent to influence prices or cause misunderstandings to others.

The official emphasized, "Both sides have been directly and through the media escalating mutual accusations while raising the tender offer price. Since these claims have significantly influenced investment decisions, investors’ risks have increased, making it necessary to verify whether the claims were made based on reasonable grounds."

On September 29, Lee Bok-hyun, Governor of the FSS, warned, "Healthy management rights competition arising from tender offers and mergers & acquisitions (M&A) should be left to market autonomy, but the current tender offer appears to involve overheated competition among the parties involved," adding, "Excessive competition may cause market instability and undermine trust in the capital market, so it must be closely monitored."

Following Governor Lee’s unusual warning about the overheated tender offer, MBK and Korea Zinc each issued statements attacking the other. MBK sharply criticized, "Baseless rumors and gossip are being widely spread that MBK is a Chinese fund and that after acquiring Korea Zinc, it will sell the company to China and leak technology to China."

Korea Zinc countered, "MBK publicly stated that it was not considering raising the tender offer price but then increased it, disrupting market order, and has been spreading baseless rumors and gossip that distort our company’s performance, value, and management capabilities."

The FSS Investigation Bureau judges that the level of verbal attacks between the two sides has gone too far. It is also known that Governor Lee privately described the Korea Zinc tender offer competition as "shabby (poor quality)."

Meanwhile, the FSS plans to complete the investigation into unfair trading related to the Korea Zinc tender offer as early as November. Considering the procedures such as requesting related materials, investigating involved parties, and legal review, it is judged difficult to finish the investigation within this month.