Ostem and Sillajen Delisting Decision Day... 200 Billion Won of 200,000 Investors' Blood Money in Turmoil

[Asia Economy Reporter Lee Seon-ae] 64,332 shareholders of Kolon TissueGene, 19,856 shareholders of Osstem Implant, and 165,246 shareholders of SillaJen are anxiously awaiting the fate of companies on the brink of delisting. The fate of Osstem Implant and SillaJen, whose stock trading was suspended due to embezzlement and breach of trust, will be decided this week. The possibility of resuming trading is slim, meaning the hard-earned investments of small shareholders will be locked up for at least six months to a maximum of one year, which is expected to cause significant repercussions.

According to the Korea Exchange on the 16th, the delisting review process is divided into two levels for KOSPI (Corporate Review Committee → Listing Disclosure Committee) and three levels for KOSDAQ (Corporate Review Committee → 1st Market Committee → 2nd Market Committee). SillaJen is likely to proceed to the 2nd Market Committee, which is the third level. Osstem Implant is also expected to face the threshold of the Initial Review Committee without resuming trading.

Osstem Implant, which had its trading suspended from January 3 due to an unprecedented embezzlement case earlier this year, was originally scheduled to receive the delisting eligibility review result on January 24. However, the Exchange extended the investigation period considering the seriousness of the case and its impact on the market. The substantive review result is expected on the 17th. The Exchange has decided to include Osstem Implant in the substantive delisting review, likely to verify the audit report by the end of March.

An official from the financial investment industry said, "The Exchange’s biggest concern is that if Osstem Implant’s trading is resumed and then suspended again, new investors who enter the market could suffer additional damages, which would increase the Exchange’s responsibility for investor losses." He added, "Therefore, the Exchange plans to include Osstem Implant in the substantive delisting review and decide on delisting based on the audit report to be submitted next month."

If included in the substantive review, Osstem Implant must submit an improvement plan within 15 days. Then, the Exchange will conduct a review and agenda formation and hold the Initial Review Committee within 20 days. The committee will decide whether to maintain listing, delist, or grant an improvement period. However, the possibility of delisting is considered low. Samsung Securities analyst Seo Geun-hee predicted, "Considering the company’s sustainability and investor protection, the likelihood of delisting is small."

Nonetheless, since it is expected to take a long time to resume trading, the damage will fall squarely on small shareholders. The losses of Osstem Implant’s small shareholders exceed 1 trillion won. Currently, nearly 2,000 small shareholders are preparing compensation lawsuits against Osstem Implant.

SillaJen is expected to receive a delisting decision at the 2nd Market Committee, equivalent to the second trial, on the 18th, which is anticipated to cause a strong backlash. If SillaJen files an objection, the 2nd Market Committee, which is the final review, will be held. At the 2nd Market Committee, SillaJen is likely to be granted another improvement period. Small shareholders of SillaJen, who have suffered trading suspension losses since May 4, 2020, are venting their frustration by urging the Exchange to withdraw the delisting. Stocks worth 750 billion won are at risk of becoming worthless overnight, and shareholders are prepared to engage in litigation.

On the 7th, the Market Committee postponed the decision on Kolon TissueGene’s delisting and decided to continue the review. Kolon TissueGene has been under substantive delisting review due to controversy over the composition of its new drug 'Invossa-K' and has had its stock trading suspended for nearly three years since May 2019. After the Initial Review Committee (first trial) in 2019 and the Market Committee (second trial) in 2020 decided on delisting, the company’s objection was accepted, and the last improvement period granted has ended. If delisting is confirmed at the final trial, Kolon TissueGene will be permanently removed from the market. The review is scheduled for August.

Lee Hyo-seop, head of the Financial Industry Office at the Korea Capital Market Institute, pointed out, "In the domestic stock market, individual investors have limited opportunities to recover their investments when companies are delisted," and emphasized, "Institutional improvements should be made to allow liquidation."

Meanwhile, the day before, a 24.5 billion won embezzlement incident occurred at Kyeyang Electric, leading to a trading suspension. This amount corresponds to 12.7% of Kyeyang Electric’s equity capital of 192.6 billion won.

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