"Complete Capital Erosion" Audit Opinion Rejected for 2 Consecutive Years... What Is the Fate of Ssangyong Motor?

[Asia Economy Reporter Ji Yeon-jin] Ssangyong Motor received a 'disclaimer of opinion' on its business year audit for last year. The previous year also received a disclaimer of opinion, and after being granted a delisting improvement period (April 15, 2021 ? April 14, 2022) by the Korea Exchange, investor attraction failed and financial improvements were not achieved.

According to the Financial Supervisory Service's electronic disclosure system on the 1st, the audit report on Ssangyong Motor's 2021 financial statements, submitted the day before, received a disclaimer of opinion from Samjong Accounting Corporation.

The accounting firm stated, "As of the report date, the company recorded an operating loss of 26,069.2 million KRW and a net loss of 257,819 million KRW," adding, "The company's current liabilities exceed current assets by 90.11 million KRW, and the total equity is 76.5 billion KRW, indicating a complete capital erosion."

It continued, "The company is pursuing M&A prior to the approval of the rehabilitation plan as a measure to improve its financial structure and to repay rehabilitation debts early," and pointed out, "this situation raises significant doubts about the company's ability to continue as a going concern." This means the company's survival depends on uncertainties such as whether the court approves the rehabilitation plan, the M&A before approval, and the implementation of management improvement plans including the rehabilitation plan after approval.

The accounting firm explained, "We were unable to obtain sufficient audit evidence to reasonably estimate adjustments to assets, liabilities, and related profit and loss items, including potential impairment of assets and classification of debt liquidity, which may arise as a final result of these uncertainties."

According to the Korea Exchange listing regulations, if the audit opinion is 'adverse' or 'disclaimer,' the common stock is delisted. However, if the auditor submits an opinion proving that the cause has been resolved before the start of orderly trading, delisting can be deferred. Ssangyong Motor also received a disclaimer of opinion on its 2020 financial statements last year. Furthermore, trading has been suspended since the disclaimer of opinion was issued in the 2020 semi-annual report in August 2020.

The Exchange will accept objections until the 21st of this month, and if there are objections, it plans to review and decide by combining the delisting reasons related to the 2020 business year audit opinion. Ssangyong Motor's largest shareholder is the Indian Mahindra Group, holding 74.65% of shares, while 48,452 minority shareholders hold the remaining 25.35%.

Ssangyong Motor stated, "We signed an M&A investment contract on January 10, 2022, and submitted a rehabilitation plan to the Seoul Bankruptcy Court on February 25, 2022, but on March 25, a cause for immediate termination of the M&A investment contract occurred," adding, "the company plans to seek new buyers and pursue resale to submit a revised rehabilitation plan to the Seoul Bankruptcy Court."

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