Suspicious Traces of EdisonEV Facing 'Delisting' Crisis... Distressed Retail Investors Cry Out

[Asia Economy Reporter Lee Seon-ae] As Edison Motors' Edison EV, a KOSDAQ-listed company acquired to raise funds for the acquisition of Ssangyong Motor, faces delisting due to an auditor's 'disclaimer of opinion,' financial authorities have launched an investigation into allegations of stock price manipulation related to the disposal of shares by Edison EV's major shareholders.

On the 31st, according to financial authorities, the Korea Exchange has begun a review to determine whether there were any unfair trading practices related to the disposal of shares by Edison EV's major shareholders.

This stage involves verifying basic data such as the trading trends of the problematic listed company's stock and checking for the possibility of stock price manipulation or unfair trading. If the review concludes that there is strong evidence of stock price manipulation, the case will be reported to the Capital Market Investigation Division of the Financial Services Commission. Subsequently, the Capital Market Investigation Division or the Financial Supervisory Service, which receives the case, will assign it to the responsible department and launch a full-scale investigation. This marks the beginning of the first step in the investigation into Edison EV's stock price manipulation.

Numerous controversies surrounding Edison EV have continuously surfaced in the market. There have been persistent suspicions that Edison Motors entered the acquisition battle aiming for stock price gains despite lacking acquisition capability. In particular, there were many criticisms regarding the unclear method of raising funds to acquire a company more than 10 times larger. Before acquiring Ssangyong Motor, Edison Motors acquired a 20% stake in Edison EV through a third-party allotment rights issue. During this process, five investment associations?DMH, SLH, Nomad Ivy, I'm Holdings, and Starlight?divided a 35% stake among themselves. Later, as Edison EV's stock price surged from the 1,500 won range to 10,000 won on the back of Ssangyong Motor's positive prospects, the investment associations sold their shares and exited. The industry believes these funds were used as the deposit for the Ssangyong Motor contract.

In fact, Edison EV's stock price remained in the 1,500 won range as recently as May last year, then soared to 82,400 won on November 12, a 55-fold increase. During this period, Edison EV's major shareholders sold most of their shares and realized profits, sparking so-called 'eat-and-run' controversies.

The combined shareholding of the five investment associations dropped from 34.8% at the end of May to 11.0% in early August. DMH's stake in Edison EV fell from 9.5% on May 30 last year to just 0.96% by July 9, about a month later. Similarly, I'm Holdings disposed of its entire 5.49% stake during a similar period.

They had secured up to 38% of Edison EV's shares, reportedly purchasing stocks at 1,500 to 3,000 won per share and selling all of them by the end of the year. After the stock price surged above 10,000 won starting in June, a month after the purchase, they concentrated on selling 23.8%, two-thirds of their total shares, over three months until August. Subsequently, Edison EV's stock price repeatedly declined, falling to 6,002 won on September 8 last year.

Accordingly, the Korea Exchange reportedly monitored Edison EV closely from the beginning of the year, investigating whether the major shareholders, the investment associations, engaged in unfair trading practices such as using undisclosed information or market manipulation during the stock price fluctuations.

On the 30th, the KOSDAQ Market Headquarters of the Korea Exchange announced that Edison EV's auditor's opinion in the disclosure of the audit report submitted on the previous day (29th) was a 'disclaimer of opinion due to uncertainty about the company's ability to continue as a going concern,' which constitutes grounds for delisting. Edison EV's trading was suspended on the 29th following the Korea Exchange's request for a disclosure regarding the auditor's adverse opinion, and the suspension was maintained due to the disclaimer of opinion on that day. However, if the reason for the auditor's opinion is 'uncertainty about the company's ability to continue as a going concern,' the company can submit an opinion letter related to this reason to resolve the delisting grounds.

The deadline for Edison EV to submit the auditor's opinion letter is April 11, within 10 business days. Failure to submit the opinion letter will constitute a formal ground for delisting. Even if the letter is submitted, if the auditor's opinion on the revised financial statements remains adverse or is a disclaimer, it will still be grounds for delisting.

The auditing firm Samhwa Accounting Corporation, responsible for the audit, stated regarding the disclaimer of opinion, "We were unable to obtain sufficient and appropriate audit evidence regarding the company's plans to improve financial conditions and secure liquidity through increased sales," and "We could not reasonably estimate the adjustments to assets, liabilities, and related profit and loss items that might result from this uncertainty."

As a result, the losses have been borne entirely by individual investors. The Korea Exchange's review process typically takes 1 to 2 weeks for urgent matters and about 2 months under normal circumstances. However, considering the subsequent procedures after the Korea Exchange's analysis of Edison EV's unfair trading, the process is expected to take a long time. Starting next month, whether Edison EV submits the opinion letter related to the disclaimer of opinion could lead to delisting reviews and prolonged trading suspensions.

Meanwhile, Edison EV is also suspected of repeating this method through the acquisition of the medical device company U&AI. By acquiring the company through a third-party allotment of new shares, other investment associations such as YSH Holdings and I'm Holdings Plus Association became major shareholders. Later, as the stock price rose on the back of the electric vehicle business entry, Edison EV raised funds through a rights offering worth about 80 billion won.

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