The Korea Exchange, the operator of the nation’s equity market, seeks to review this week the accounting misconduct of the country’s second-largest biotech company by market cap, which could result in the delisting of the company in the worst-case scenario.
“The initial meeting timeline has not yet been fixed but it may take place as early as Monday,” an official from the bourse operator said Sunday.
In early December, the KRX established a seven-member panel to look into whether the presence of Samsung BioLogics -- the bio drugmaker arm of the nation’s largest conglomerate Samsung Group -- on the main bourse is legitimate.
The committee may choose to either clear BioLogics of the accusation, allowing it to resume trading of its stocks; give it a one-year probation period to amend the accounting error before allowing its stock transactions; or remove the company from the stock market.
The deadline for the decision is Dec. 31, under the KRX’s rules. This marks the 20th trading day after the KRX’s decision on Nov. 30 to put the fate of BioLogics in the hands of the KRX-led committee. The deadline can be extended by a month.
Trading of Samsung Biologics’ securities has been suspended on the main bourse.
With 22.1 trillion won ($19.7 billion) in market cap, BioLogics is the eighth-largest company by market cap on the top-tier stock market Kospi as of Friday. As of end-2017, over one-tenth of its shares were owned by some 78,600 retail investors, according to data from Korea Securities Depository.
The Securities and Futures Commission, a financial regulator that audited the company, concluded on Nov. 14 that the company committed an “intentional violation of accounting rules” to inflate profits of BioLogics. Transactions of BioLogics’ stocks and 11 equity-linked warrants have been suspended.
Under current KRX regulations, a company with total assets of over 2 trillion won is subject to suspension of its stock transactions if the amount of any such misstatement exceeds 2.5 percent of stockholders’ equity.
In BioLogics’ case, the company’s total assets were worth 7.2 trillion won and shareholders’ equity stood at 3.8 trillion won. SFC estimated BioLogics to have vastly overstated its profits by over 4.5 trillion won, far beyond the punishable level of 179.6 billion won.
Market watchers and activists have argued this ultimately made the case for a merger between Samsung C&T and Cheil Industries, and associated this issue with Samsung Electronics Vice Chairman Lee Jae-yong’s control over the conglomerate.
By Son Ji-hyoung