Retail investors despair over their bio shares

Finance

Published: 19 Jan. 2022, 19:05 Updated: 19 Jan. 2022, 19:31

Retail investors despair over their bio shares

A group of SillaJen shareholders stage a protest in front of the Korea Exchange headquarters in Yeouido, western Seoul, on Jan. 18, urging the stock exchange operator to resume trading of the biopharmaceutical company. [YONHAP]

Retail investors in Kosdaq-listed biopharmaceutical companies are losing their shirts after a series of scandals, and at least one company faces possible delisting.

A shareholder revolt is brewing at SillaJen after the Korea Exchange (KRX) on Jan. 18 announced its decision to tentatively delist the company from the Kosdaq one year and eight months after trading in its shares was suspended.

A group of SillaJen shareholders staged a protest in front of the KRX headquarters in Yeouido, western Seoul, urging a resumption of trading of the shares. Online, investors are threatening to sue KRX.

“The delisting of SillaJen doesn’t make sense at all to me as the company showed enough efforts to improve its business over the past year,” one online post read. “I’ve been waiting for 20 months for trading to be resumed, and now I don’t know what to do.”

Some 92.6 percent of SillaJen shares are owned by over 174,100 retail investors.

Trading in the stock was halted on May 4, 2020 after former CEO Moon Eun-sang and other key executives were indicted on charges of embezzlement and breach of duty. Moon was charged with insider trading after allegedly selling millions of SillaJen shares just before a failed clinical trial caused their price to tank in 2019.

In November 2020, the company was given a year to improve its management transparency. The company recently submitted statements detailing its efforts to improve its business, but failed to convince the KRX.

The case is now with the Kosdaq market committee, which will make a decision in mid-February whether to delist the company or give it a second chance for revival.

Listed in 2016, SillaJen shares rose as high as 152,300 won ($128) at the end of 2017 on expectation for Pexa-Vec, an anticancer drug candidate. That made it the second largest company on the Kosdaq in terms of market capitalization. But shares plummeted after news that the drug failed Phase 3 clinical trials. On May 4, 2020, the day trading was suspended, shares closed at 12,100 won, down 92 percent from their peak.

Osstem Implant, the country's largest dental implant manufacturer, is facing a similar situation.

Osstem Implant's shares were suspended from trading on the Kosdaq on Jan. 3 after the company revealed that a 45-year-old employee skimmed 221.5 billion won off its books.

The KRX is reviewing the company’s eligibility to remain on the Kosdaq and a decision is likely on Jan. 24. If it decides that the company is unqualified, the case will be given to the Kosdaq market committee and shares will face another month of suspension.

The committee will decide the fate of the company, and there are three scenarios: resumption of trading, a one-month grace period to improve its business, or delisting.

As of the end of last September, a total of 19,856 retail investors held 7.94 million Osstem shares, about 56 percent of outstanding shares.

The possible delisting of SillaJen and Osstem Implant came as Celltrion, the Korean biopharmaceutical giant, is under investigation for alleged accounting fraud.

The Financial Services Commission (FSC) is investigating three listed Celltrion companies — Celltrion, Celltrion Healthcare and Celltrion Pharm — after a nearly three-year probe by the Financial Supervisory Service (FSS).

Concerns center on whether Celltrion Healthcare and Celltrion Pharm, marketing companies that handle the sale of Celltrion products, are illegally profiting from transactions with the pharmaceutical manufacturer. The FSS confirmed that it has handed its findings to the FSC for further deliberation.

If it turns out that there was accounting fraud, the companies will come under the review of Korea Exchange.

The shares prices of all three companies have lost about half their value over the year. On Jan. 18, Celltrion Healthcare, which had been the biggest company on the Kosdaq in terms of market cap since Feb. 2018, moved down to second place. It recovered the top position Wednesday in intraday trading.

“When the FSC concludes that there was accounting fraud between companies, intentionality will be a key factor behind the KRX’s review of whether the companies can stay listed,” said Lee Jun-ho, an analyst from Hana Financial Investment. “Previously when accounting fraud was revealed at Samsung Biologics, the company was suspended from trading for 19 days.”

BY SARAH CHEA [chea.sarah@joongang.co.kr]