[Into the Stock]'Delisting' Avoided by Osstem Implant... 20,000 Retail Investors Hope for Trading Resumption

[Asia Economy Reporter Lee Seon-ae] Ostem Implant, embroiled in a large-scale embezzlement scandal, has received an 'unqualified' audit opinion, escaping the risk of delisting. Approximately 20,000 small shareholders are relieved to avoid losing their entire investment.

The Korea Exchange will hold a Corporate Delisting Committee meeting on the 30th, which is 20 business days from the submission date of Ostem Implant's improvement plan, to decide whether to maintain listing, grant an improvement period, or delist the company. If the decision is delisting, the case will move to the KOSDAQ Market Committee for a final judgment. However, this crisis was averted as the external auditor, Induk Accounting Corporation, submitted an 'unqualified' audit opinion. For KOSDAQ-listed companies, receiving an adverse audit opinion results in the suspension of the listing eligibility review and immediate formal delisting. If the listing is maintained, trading resumes immediately. However, if an improvement period is granted, the listing status will be reviewed again after the period by the Corporate Delisting Committee, during which trading remains suspended.

Small shareholders are even fearful of the granting of an improvement period. Ostem Implant has 19,856 small shareholders. They hold 7,939,816 shares, accounting for 55.6% of the total issued shares of approximately 14.29 million. Based on the closing price on the day before trading suspension (December 30, 2021), this amounts to about 1.133 trillion KRW. Additionally, as of the last trading day before suspension, 1,212 investors engaged in margin trading by borrowing money from securities firms, with outstanding balances totaling 23 billion KRW. Including short-term loans from unsettled trades and loans secured by pledged shares, the total credit extended reaches 113 billion KRW. If trading remains suspended during the improvement period, the interest burden will be significant.

The internal accounting control system audit opinion was given as 'adverse.' Due to the massive embezzlement of 221.5 billion KRW, receiving an unqualified opinion was practically impossible. An additional impairment loss from receivables other than trade receivables was also reported. On the 21st, Ostem Implant disclosed an impairment loss of 108.8 billion KRW for the previous year, equivalent to 53.1% of its equity at the end of 2020. This disclosure added another reason for the listing eligibility review, which will be included as an agenda item for the Corporate Delisting Committee for consolidated review.

Accordingly, the key issue at the Corporate Delisting Committee is how thoroughly the management transparency improvement plan, aimed at strengthening the collapsed internal control system, has been implemented. However, the market views the possibility of trading resumption as high, given that despite the impairment loss exceeding 50% of equity, the company recorded an annual net profit of about 30 billion KRW. Ostem Implant emphasized, "For the purpose of improving the adverse opinion, we commissioned Samil Accounting Corporation to design and apply an advanced internal accounting control system, appointed a majority of outside directors, introduced an audit committee, and established an ethics management committee to enhance management transparency."

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