Kumyang, once a leading player in the battery sector with a market capitalization nearing 10 trillion won, has faced a delisting decision. Analysts attribute this downfall to aggressive business expansion, a surge in speculative trading, and repeated controversies over disclosures that eroded market trust, culminating in a rejection of audit opinions.
On May 21, the Korea Exchange reported that Kumyang filed for a suspension of the delisting decision at the Seoul Southern District Court. The exchange had announced the delisting decision the previous day during a meeting of the Securities Listing Committee. The court's ruling will determine the next steps in the delisting process.
From Fine Chemicals to Battery Leader
Founded in 1978, Kumyang initially produced fine chemical products, including foaming agents. In the 2020s, the company ventured into the battery business, gaining significant attention. At that time, Park Soon-hyuk, then the company's PR director, actively promoted the growth potential of the battery industry, earning the nickname "Battery Uncle" among individual investors.
As the electric vehicle market expanded and optimism grew around the battery sector, Kumyang's stock price surged. On July 26, 2023, it reached an all-time high of 194,000 won, bringing its market capitalization close to 10 trillion won. At that point, some market observers referred to Kumyang as the "second EcoPro." However, the company's actual performance and profitability failed to meet market expectations, leading to a subsequent sharp decline in stock price.
Trust Eroded Amid Controversies and Investments
The issues began to surface during Kumyang's aggressive expansion efforts. The company undertook large-scale investments in mining operations in Mongolia and the Congo, as well as the construction of a battery plant in Busan. However, concerns grew over funding burdens and the reliability of disclosures.
Particularly troubling was the drastic downward revision of projected revenues and operating profits from the Mongolian mine, initially estimated at 40 billion and 160 billion won, respectively, to just 6.6 billion and 1.3 billion won within a year. This sparked allegations of inflated performance projections, leading to criticism of what investors termed "exaggerated disclosures."
In September 2024, amid a slowdown in the battery sector due to a temporary demand stagnation in electric vehicles, Kumyang announced a plan for a 450 billion won capital increase. However, the market reacted coldly to the large-scale fundraising effort, prompting the company to withdraw the plan in February of the following year.
Audit Firm's Rejection Signals Delisting Risk
Kumyang was designated as a non-compliant company by the exchange in October 2024 and again in March of the following year due to issues related to disclosures about the Mongolian mine and the capital increase. As penalties accumulated, the company was classified as a management issue.
The final blow came when an external audit firm rejected its audit opinion, raising doubts about the company's ability to continue as a going concern. A rejection of an audit opinion is considered a significant warning sign of potential delisting for publicly traded companies.
Following this, Kumyang entered a trading suspension. Just before the suspension on March 21 of last year, the stock closed at 9,900 won, marking a nearly 94.9% drop from its peak in July 2023. The market capitalization also plummeted to around 600 billion won. In March of this year, Kumyang received a second consecutive rejection of its audit opinion from an external auditor.
Concerns Raised Over Regulatory Oversight
While Kumyang has filed for a suspension of the exchange's delisting decision, industry insiders are skeptical about the likelihood of a favorable ruling. One industry source noted, "Given that much of the process has already progressed according to exchange regulations, it will be difficult to reverse the outcome."
However, some are questioning the responsibility of financial authorities. Another industry source pointed out, "The delisting of a KOSPI-listed company is a significant event that can have considerable market impact." With nearly 240,000 small investors affected, there are concerns about potential oversights in the financial authorities' monitoring of exaggerated disclosures.
In response to recent cases like that of Samchundang Pharm, financial authorities have proposed improvements to disclosure practices for pharmaceutical and biotech companies. However, there are ongoing evaluations that similar disclosure controversies continue to arise, with some proposed reforms remaining at a mere recommendation level, limiting their effectiveness.
* This article has been translated by AI.
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