Law Firm Hannuri to File Class Action Lawsuit Against Padu and Securities Firms Over "Exaggerated IPO Allegations"

Law firm Hannuri has pointed out procedural illegality related to the initial public offering (IPO) of Pado, a semiconductor design (fabless) company, and has begun recruiting victims for a class-action lawsuit. This lawsuit is expected to be the first class-action case related to an IPO since the enactment of the securities-related class-action law.

On the 15th, Hannuri stated, "We plan to file a securities-related class-action lawsuit against Pado, which pushed forward with the IPO while concealing the fact that its second-quarter sales were virtually 'zero (0),' as well as against the securities underwriters NH Investment & Securities and Korea Investment & Securities," announcing this plan.

On August 7th, at the Korea Exchange in Yeongdeungpo-gu, Seoul, an official is taking a commemorative photo after presenting a listing plaque at the listing ceremony of Padu Co., Ltd. on the KOSDAQ market. [Image source=Yonhap News]

Hannuri said, "Currently, Pado has only explained its third-quarter sales, but the second-quarter sales, which amounted to a mere 59 million KRW, are a bigger issue," adding, "Pado and the underwriting securities firms should have halted the listing and public offering procedures in early July and refrained from proceeding with subsequent steps such as demand forecasting and subscription." The firm explained, "Since sales aggregation does not take long, Pado must have known about this shocking sales figure by early July, and the underwriting securities firms, which would have requested the second-quarter provisional results, would naturally have been aware of it."

Furthermore, Hannuri claimed, "Moreover, in the securities amendment report (investment prospectus) and the attached corporate due diligence report submitted in mid-July, Pado stated that 'stable order status is maintained, so there is no possibility of deterioration in business activities' and 'continuous increase in sales and improvement in profitability will be achieved.' These statements are false and misleading."

Pado, considered a major player in the IPO market in the second half of this year, saw its stock price fall below 20,000 KRW recently due to the earnings shock and the release of lock-up shares. Pado's third-quarter sales were 320 million KRW, a 97.6% plunge compared to 13.592 billion KRW in the same period last year. Operating losses increased to 34.4 billion KRW from a loss of 4.2 billion KRW last year. Cumulative sales through the third quarter were 18.044 billion KRW, down 44.6% from 32.56 billion KRW last year. The cumulative loss through the third quarter reached 34.41 billion KRW. In particular, the market reacted sensitively to Pado's earnings shock as the actual sales showed a significant gap from the expected sales of 120.294 billion KRW stated in the securities registration statement at the time of the IPO.

Hannuri said, "Pado did not halt the listing process because it likely judged that if it was revealed that second-quarter sales were virtually zero, the listing itself would be difficult to proceed," adding, "According to Article 125 of the Capital Markets Act, if there is false information or omission of important matters in the securities registration statement and investment prospectus causing losses to securities acquirers, the registrant and underwriters (securities firms) are liable for damages."

Additionally, "Such liability for damages is subject to securities-related class-action lawsuits," Hannuri said, "We plan to file a lawsuit gathering shareholders who acquired Pado shares in this IPO and suffered losses by selling below the public offering price of 31,000 KRW, or those currently holding Pado shares. According to disclosure data, a total of 276,692 people invested a whopping 193.7 billion KRW in the Pado IPO. The number of affected shareholders is estimated to be at least tens of thousands, with damages amounting to hundreds of billions of KRW," it added.

According to Hannuri, since the enactment of the securities-related class-action law in 2005, a total of 11 class-action lawsuits have been filed, but this is the first class-action lawsuit related to an IPO. Securities-related class-action lawsuits are damage claims filed by one or more representative plaintiffs on behalf of multiple victims who suffered losses while trading securities. Unless an opt-out is filed separately, the court's decision applies not only to the representative plaintiffs but also to other victims who did not participate in the lawsuit.

Since its establishment in 2008, law firm Hannuri has successfully handled numerous corporate governance disputes and securities-related illegal acts lawsuits. Among the 11 securities-related class-action lawsuits filed to date, Hannuri has represented six cases, securing compensation rulings or settlements in four cases including the Cimotek capital increase-related class-action lawsuit and stock price manipulation cases involving Deutsche Bank and Royal Bank of Canada equity-linked securities (ELS).

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