Sillajen Begins Delisting Review... Will Shares Become Worthless?

Moon Eun-sang, CEO of SillaJen, is bowing his head in apology regarding the suspension of the global Phase 3 clinical trial of Pexa-Vec for liver cancer at an emergency meeting held on August 4 last year at the CCMM Building in Yeouido, Seoul.

[Asia Economy Reporter Koh Hyung-kwang] '10,650 won (closing price on May 16, 2017) → 152,300 won (intraday on November 21, 2017)'. A 14-fold (1330%) surge in just 6 months.

The 'bio miracle' SillaJen has ultimately been designated for a delisting suitability review, putting it at risk of being expelled from the KOSDAQ market. Once rising to the second largest market capitalization in the KOSDAQ and hailed as a role model among bio stocks, SillaJen is now facing delisting after nine current and former executives were prosecuted on charges including fraudulent trading and breach of trust, increasing anxiety among its 170,000 minority shareholders. The final decision is expected to take up to two years.

According to the financial investment industry on the 20th, the Korea Exchange announced yesterday that SillaJen has been designated for a delisting suitability review. This review process examines whether there are issues with maintaining the company's listing. According to KOSDAQ listing regulations, the exchange can deliberate and decide on delisting after confirming embezzlement or breach of trust above a certain scale, considering the company's continuity, management transparency, and market soundness.

Individual investors holding SillaJen shares are expected to wait over two years for a final conclusion. First, the exchange must decide within 15 business days (by December 10) through the Corporate Delisting Committee whether to delist SillaJen or grant a period for improvement. If SillaJen submits an improvement plan during this period, the committee's review is postponed for up to 20 business days from the submission date.

If the committee concludes with delisting, the KOSDAQ Market Committee awaits. This committee also deliberates and decides whether to delist or grant an improvement period. Even if the KOSDAQ Market Committee votes for delisting, it is not the end. If the company files an objection, the committee's review reopens. The final delisting decision can take up to two and a half years. If the result grants an improvement period, after it ends, the Corporate Delisting Committee reviews and decides again.

SillaJen entered the KOSDAQ market in 2016 and heated the stock market with clinical trial news of its anticancer drug Pexa-Vec. The stock price, which was 10,650 won on May 16, 2017, soared to 152,300 won intraday on November 21 of the same year. It was a 14-fold surge in six months. At the end of November 2017, amid rising expectations for Pexa-Vec’s global phase 3 clinical trial, the market capitalization based on closing price reached 8.711 trillion won.

However, after the clinical trial suspension news was announced in August last year, the stock price plummeted, hitting the lower limit for three consecutive days, and is currently suspended at 12,100 won. As of the end of last year, SillaJen had 168,778 minority shareholders holding 87.68% of the shares. At the current price (12,100 won), the stock value amounts to 750 billion won. If SillaJen is ultimately delisted, these shares will become worthless, inevitably causing losses to investors.

Prosecutorial investigations are also underway. Nine current and former executives have been prosecuted on charges including fraudulent trading and breach of trust. The key issues were whether SillaJen executives sold shares knowing about the clinical trial failure in advance and whether political interference occurred during the listing process. Recently, the Seoul Southern District Prosecutors’ Office Financial Investigation Division 1 concluded that the alleged political and governmental lobbying was 'unsubstantiated.' Former CEO Moon Eun-sang and others were indicted on charges including violations of the Capital Markets Act. According to prosecutors, Moon and others are accused of acquiring 191.8 billion won in illicit gains by subscribing to bonds with warrants (BW) without capital. However, regarding suspicions of selling shares before disclosing the clinical failure, it was concluded that it is difficult to recognize charges when comparing the timing of share sales and the generation of undisclosed information.

This content was produced with the assistance of AI translation services.