Trading Resumes from Tomorrow: "Ostem's 40,000 Retail Investors Can't Smile... Panic Selling Fear is Dizzying"

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[Asia Economy Reporter Lee Seon-ae] The fate of Osstem Implant will be decided on the 27th. With a high possibility of trading resumption, the 40,000 individual investors whose funds have been tied up for four months are expected to breathe a sigh of relief. However, the mood is not entirely bright. Once trading resumes tomorrow, a flood of sell orders is anticipated, making a significant price fluctuation and a bearish trend inevitable. Given the high proportion of small shareholders, it seems impossible to avoid the 'panic selling fear.'

According to the Korea Exchange, the Corporate Evaluation Committee (CEC) will convene this morning to review and decide on the Osstem Implant agenda. The CEC serves as the first instance of the substantive review of listing eligibility, determining whether to maintain the listing or grant an improvement period (within one year) for Osstem Implant. Maintaining the listing is highly likely. Accordingly, trading of Osstem Implant is expected to resume from tomorrow, as the company has demonstrated favorable performance in financial stability and business continuity.

Osstem Implant triggered the substantive review of listing eligibility after announcing on January 3 that it had filed a complaint against an employee in charge of fund management, Mr. Lee, on charges of embezzlement. The embezzled amount was 221.5 billion KRW. At the CEC meeting held on the 29th of last month, the Korea Exchange discussed whether to maintain the listing but failed to reach a conclusion, deciding to 'adjourn.' At that time, since Osstem Implant had shown favorable results in business continuity and financial stability, the prevailing expectation was that a decision to resume trading would be made, making the adjournment an unusual move. Some members expressed the opinion that the decision should be postponed to observe efforts to improve governance, such as appointing outside directors at the shareholders' meeting and establishing various committees, as well as the appropriateness of the internal accounting control system operation. The market evaluated the Korea Exchange's approach as cautious. However, it is understood that most of the issues examined by the Korea Exchange have now been substantially resolved. Therefore, the market views the possibility of maintaining the listing as 100%.

Osstem Implant also expects a decision to maintain its listing. Last month, it commissioned Samil Accounting Corporation to complete the design and application of an advanced internal accounting control system. To enhance management transparency, the company explained that it had undertaken measures such as ▲ appointing a majority of outside directors ▲ introducing an audit committee ▲ establishing an ethics management committee ▲ setting up an outside director recommendation committee ▲ designating a compliance officer. These measures were all approved as originally proposed at the shareholders' meeting held on the 31st of last month, immediately after the CEC meeting. Regarding the contentious internal accounting control system, Osstem Implant submitted a statement to the Korea Exchange last week asserting that there are no issues with the system built with consulting from Samil Accounting Corporation.

If the decision to maintain the listing is made, Osstem Implant's trading will resume after about four months since January 3. The closing price of Osstem Implant on December 30 last year, just before the trading suspension, was 142,700 KRW, with a market capitalization of 2.0386 trillion KRW. As of the end of last year, there were 42,964 small shareholders holding 62.2% (8,888,944 shares) of the issued shares.

However, a large volume of sell orders is inevitable upon trading resumption. The high proportion of small shareholders is a weakness. In fact, at the time of the adjournment decision, some small shareholders viewed the gained time as fortunate, expecting the 'sell-off' sentiment to subside.

Meanwhile, Osstem Implant's performance is reaching record highs. The company announced yesterday that its operating profit for the first quarter of this year was provisionally estimated at 51.2 billion KRW, a 100.5% increase compared to the same period last year. Sales amounted to 234.1 billion KRW, up 36.5% year-on-year. The sales figure is the highest ever recorded for a first quarter. Operating profit also surpassed 50 billion KRW for the first time in a quarter. A company official said, "Riding on the strong first-quarter performance, we will continue the high-growth trend," adding, "We will accelerate global expansion based on core technologies and products such as implants, digital dentistry, and orthodontics, while also considering global mergers and acquisitions (M&A)." Osstem Implant has set a sales target of 1 trillion KRW for this year. Despite reflecting losses from the large-scale embezzlement incident last year, it posted a net profit of 32 billion KRW. On a consolidated basis, last year's sales and operating profit reached record highs of 824.7 billion KRW and 143.6 billion KRW, respectively.

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