Unlisted Digital Marketing Firm Led by Baek Seohyun Faces Delisting Review After 15-to-1 Stock Reduction
Controversy Over Investments Unrelated to Core Business, Including Acquisition of New Oriental Hotel and 40% Stake in Gageumnongsan
The market's attention is focused on Brand Refactoring, which has newly become the largest shareholder of Dong Sung Pharmaceutical, a mid-sized pharmaceutical company. Concerns are growing that Dong Sung Pharmaceutical may follow a similar path to another company operated by Brand Refactoring’s largest shareholder, which is now facing delisting due to management failure.
According to the Financial Supervisory Service's electronic disclosure system on August 22, Dong Sung Pharmaceutical announced in April that its largest shareholder had changed from Lee Yanggu and five others to Brand Refactoring. This change occurred after former Chairman Lee Yanggu sold his entire stake of 3.68 million shares (14.12%) to Brand Refactoring. The transaction was valued at 3,256 won per share, totaling 12 billion won.
Brand Refactoring is an unlisted digital marketing company founded in 2022, with CEO Baek Seohyun holding a 60% stake as the largest shareholder. The company recorded sales of 8.4 billion won last year, based on its own brands and online distribution network.
CEO Baek also serves as the CEO of Celestera (formerly Clinomics), a KOSDAQ-listed company. Celestera’s main business is the sale of medical devices, including cancer diagnostics. Baek was appointed CEO in April 2023 during the process in which Geno Investment Association No. 1 acquired management rights of Celestera through a paid-in capital increase. Baek is also the largest shareholder of Geno Investment Association No. 2 (holding a 95% stake), which is a related party to Geno Investment Association No. 1.
The transfer of Dong Sung Pharmaceutical’s management rights to Brand Refactoring has raised questions within the industry. This is because Brand Refactoring is relatively small and lacks clear business relevance, making the rationale for its becoming Dong Sung Pharmaceutical’s controlling shareholder unclear. Some suggest a vision for overseas expansion and non-pharmaceutical business growth leveraging digital marketing capabilities, but doubts about the feasibility remain stronger.
Mistrust surrounding Brand Refactoring and CEO Baek is intensifying. Celestera, led by Baek, received a disclaimer of opinion from its external auditor due to uncertainty about its ability to continue as a going concern and is currently undergoing delisting review procedures. Notably, the company executed a 15-to-1 stock reduction this year, cutting the total number of shares from 38 million to 2.5 million-a reduction of over 93%-directly impacting investors.
The stock market views Baek’s acquisition of Celestera as a de facto hostile takeover. Baek, who had previously operated Brand Refactoring, a company unrelated to the bio sector, abruptly joined Celestera’s management in 2023, ousted the original founders and executives from the front lines, and established a solo leadership structure.
Subsequently, Celestera faced a series of management failures. After Geno Investment Association No. 1 became the largest shareholder, the company raised more than 50 billion won through five rounds of convertible bond issuances and paid-in capital increases, but most of the funds were used for debt repayment and external investments.
In particular, controversy grew as Celestera made investments unrelated to its core business in order to meet the sales requirements for being removed from the watch list, such as spending 18.5 billion won to acquire New Oriental Hotel and purchasing a 40% stake in Gageumnongsan, which owns an automated mushroom cultivation system. Meanwhile, there was insufficient investment in core R&D areas such as genome analysis and cancer diagnostics.
As a result, Celestera failed to establish a substantial revenue model as promised at the time of its technology-special listing and only accumulated losses. The company posted net losses of 42.4 billion won in 2023 and 47.1 billion won in 2024, with accumulated deficits exceeding 100 billion won. As this track record has become known, concerns among Dong Sung Pharmaceutical shareholders about the new largest shareholder are growing.
Meanwhile, Dong Sung Pharmaceutical has recently pointed to Brand Refactoring as the cause of the company’s stock trading suspension.
This is because Brand Refactoring filed a criminal complaint against Dong Sung Pharmaceutical’s current management for alleged embezzlement and breach of trust in June, which was reported to the Korea Exchange, triggering a substantive review of listing eligibility and resulting in the suspension of stock trading.
A Dong Sung Pharmaceutical official stated, “Brand Refactoring’s pattern of corporate acquisition is typical of a corporate raider. We believe there is evidence that they conspired with former Chairman Lee Yanggu to acquire the company, and we are preparing to file a joint complaint for breach of trust.”
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