Dong Sung Pharmaceutical Minority Shareholders and Creditors: "Investigator's Report Ignores Rehabilitation Potential, Unjustly Pushes for Liquidation"

Minority shareholders and creditors of Dong Sung Pharmaceutical, which is currently undergoing a rehabilitation process, have criticized the court-appointed investigator's report for being based on flawed premises and unreasonable assumptions, concluding that liquidation is more likely.

According to the financial investment industry on November 10, criticism is spreading among many creditors and minority shareholders who believe in Dong Sung Pharmaceutical's potential for recovery, claiming that "the investigator's report deliberately undervalued the company's future."

The report in question concluded that restructuring through M&A is preferable to independent rehabilitation, based on the assessment that Dong Sung Pharmaceutical's going-concern value is lower than its liquidation value. The core issue is that the figures in the report are based on the unrealistic assumption of a 'perpetual growth rate of 0%'.

Minority shareholders and creditors argue that the investigator calculated the company's value on the premise that Dong Sung Pharmaceutical would not achieve even a single won of growth in the future. They point out that this directly contradicts market data, such as the recent surge in sales on Amazon in the United States, the expansion of global exports, and explosive growth in men's products.

In particular, Dong Sung Pharmaceutical's flagship product, "Herb Hair Dye," is expected to achieve record results in 2025, with a 65% year-on-year increase in sales during Prime Day. Despite this clear evidence of future growth potential, the investigator's report completely excluded such factors.

The minority shareholders and creditors emphasized, "The report undervalues the company's viability and recommends pursuing M&A before approval, which can be interpreted as an attempt to push for a 'sale of the company' as a restructuring tool, disregarding the interests of minority shareholders and existing creditors."

They also pointed out that, according to the report, Dong Sung Pharmaceutical's assets exceed its liabilities, and the company is in a position to return to profitability through global sales expansion. Nevertheless, the report preemptively blocked any attempt to pursue an independent rehabilitation plan, which they argue contradicts the very essence of legal rehabilitation procedures.

Another point of contention is that the investigator directly recommended pursuing "pre-approval M&A," as if acting as the decision-making body for management. This, they argue, clearly exceeds the investigator's role, as such matters should be approved by the court or led by the administrator. The report is being criticized for intervening in decisions that determine the company's fate, rather than merely providing an assessment of the current situation.

The minority shareholders and creditors also stressed that the report omitted any investigation into damages or specific loss analysis regarding former management, who are believed to bear some responsibility for Dong Sung Pharmaceutical's management failure, citing "awaiting the results of a police investigation" as the reason.

This is seen as the investigator effectively abandoning the core duty of identifying the causes of the company's debt, leading to criticism that "responsibility is being ignored while restructuring is being rushed."

Market observers are concerned that this report could ultimately serve as grounds to unjustly push a potentially viable company into liquidation procedures.

Especially considering that M&A in the corporate restructuring market can align with the interests of certain capital groups, the report's prioritization of asset sales over the protection of minority shareholders and existing creditors raises serious ethical concerns.

One minority shareholder stated, "If there were no intention to hand over the company we have protected so easily, such a report would never have been produced," adding, "The court should never make a decision based on this report."

The minority shareholders and creditors emphasized, "The rehabilitation process for Dong Sung Pharmaceutical is still ongoing, and the investigator's report is merely a reference with no legal binding force. However, since it can have a substantial impact on the court's decision regarding the approval of the rehabilitation plan, a thorough review of its unfairness and intentions is necessary." They added, "What is needed now is not liquidation, but a renewed search for a balanced path to rehabilitation that serves the interests of the debtor, shareholders, and creditors alike."

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