FSS Sends 'Inflated IPO' Controversy Case to Prosecutors

"Fado, Hidden Due to Expected Sharp Sales Decline"
NH Investment & Securities Employee in Charge of IPO Also Sent to Prosecution

Last year, semiconductor design company Padu and NH Investment & Securities, the lead underwriter for its IPO, were handed over to the prosecution amid controversy over a 'puffed-up listing.'

On the 22nd, the Financial Supervisory Service announced that it had sent the investigation results on Padu and NH Investment & Securities, the lead underwriter of Padu's IPO, to the prosecution with a recommendation for indictment on charges of violating the Capital Markets Act.

Padu debuted on the KOSDAQ market in August last year through a technology special listing. In the securities registration statement submitted in July, one month before the listing, Padu estimated its annual expected sales at 120.3 billion KRW. However, its sales in the second quarter were only 59 million KRW, and in the third quarter, just 320 million KRW. Following the earnings announcement, the stock price plummeted 45% over three days and has yet to recover to the pre-announcement level.

According to the Financial Supervisory Service, Padu's management anticipated a sharp decline in sales due to reduced and halted orders from major clients starting at the end of 2022 but concealed this fact and attracted investment through pre-funding in February last year.

It was even revealed that the management realized personal trading profits by selling some of their shares during this process. In particular, during the preliminary listing review and securities registration submission from March to June last year, Padu calculated its expected sales without reflecting the impact of the halted orders from major clients and the resulting sharp decline in future sales.