Fate of Osstem Implant handed over to KRX’s corporate review committee

Osstem Implant's headquarters in Gangseo District, western Seoul [NEWS1]

The Korea Exchange (KRX) said Thursday scandal-ridden Osstem Implant needs to be thoroughly reviewed regarding its eligibility to remain on the Kosdaq.

The fate of the company will now be handed over to KRX’s corporate review committee. The committee will review the case within 20 business days, and there could be three scenarios: delisting, giving it a one-year grace period to improve business, or letting it resume trading.

“KRX thoroughly reviewed the possibility of delisting Osstem Implant and decided that the company should be the subject of a review on its eligibility,” the exchange wrote in a regulatory filing Thursday. “If Osstem submits a report on how it improved in business within 15 days, the decision by the corporate review committee will be announced 20 days after it receives the report.”

Shares of Korea’s largest dental implant manufacturer 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 ($185.2 million) from its books.

The employee, who was only identified by the surname Lee, transferred a total of 221.5 billion won from the company’s account to his stock account through 15 transactions between Nov. 2020 to Oct. 2021. Lee worked as the head of the finance department of Osstem.

The KRX’s decision was originally scheduled to come out on Jan. 24, but the exchange delayed it saying that “careful judgement is needed considering the effects it would have on the market and because there is a large degree of public attention.”

If KRX’s corporate review team orders a resumption of trading, the shares could be traded on the market right away. But if it decides on the delisting, the case will be handed over to the Kosdaq review committee for a final decision. If the Kosdaq committee orders delisting, the company will be completely delisted from the Kosdaq market.

Um Tae-kwan, CEO of Osstem Implant, said in an interview with the JoongAng Ilbo on Feb. 8 that of the 221.5 billion won, 33.5 billion won was returned, which makes the final embezzled amount total 188 billion won. Um added that taking into consideration assets that are deemed to be retrievable, the total loss comes to 87 billion won.

The retrievable assets include 62.6 billion won worth of gold bars, 25 billion won of stocks, 12.9 billion won of real estate owned by Lee’s family and 400 million won in cash, according to Um.

Retail investors are especially sensitive to the dental manufacturer's fate as they own 56 percent of the shares outstanding. A total of 19,856 retail investors own 7.94 million shares of the total 14.3 million shares.

Some shareholders filed a compensation suit against Osstem and Lee, arguing that the share price of the company will sharply decrease even if the KRX allows the resumption of trading.

CEO Um promised to do everything to regain trust from shareholders, pinpointing that increasing the value of the company by improving the profitability would be the best he can do for the shareholders.

Osstem Implant reported 32 billion won in net profit in 2021, down 69.1 percent on year.

It fell considerably short of the market consensus of 102.6 billion won compiled by FnGuide.

Annual revenue came in at 823 billion won, up 30.3 percent on year, while operating profit rose 44.6 percent to 141.9 billion won.

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