Financial Supervisory Service, review until the 13th… Should I ask for a correction?
After reviewing the last 3 months… Most schedules are postponed
Five places, including Geumyang, are provided directly by the Financial Supervisory Service… Korea Zinc also faces controversy over ‘false disclosure’
Market attention is focused on whether Korea Zinc’s large-scale paid-in capital increase will pass the Financial Supervisory Service’s review board. This paid-in capital increase, which was conducted shortly after the tender offer, is at the center of controversy due to damage to shareholder value and suspicions of unfair trading. Looking at the cases of the past three months, only a very small number of securities reports became effective within the specified period, so it is highly likely that Korea Zinc’s bequest will be delayed or even impossible.
◆The Financial Supervisory Service’s screening threshold is ‘not easy’… 3 postponements in 2 months
According to the financial authorities on the 5th, the Financial Supervisory Service is reviewing the paid-in capital increase securities report submitted by Korea Zinc on the 30th of last month. If no special reason for correction occurs by the 13th, Korea Zinc will be able to proceed with paid-in capital increase under the conditions stated in the report. According to the Capital Markets Act, the effective date of stock offering of a listed corporation is 10 trading days after submission (7 trading days for shareholder and third party allocation).
However, it took more than a month for the recent paid-in capital increase securities reports to take effect. Some places have been waiting for two months.
This is because if a correction occurs in the main contents of the report, the effective date is recalculated to protect investors. In some cases, companies supplement the contents themselves, and in most cases, they do so by communicating with the Financial Supervisory Service’s Disclosure Review Office, which reviews securities reports. In addition to the company’s ‘voluntary correction’, there are also cases where the Financial Supervisory Service directly rejects the correction. If it is determined that the securities report submitted by a company contains significant lies, omissions, or misrepresentations, Geumgang Muyeon requests the submission of a corrected report through public notice.
Among the 19 listed companies that submitted securities reports for paid-in capital increase within the past three months (August~), except for those where the effective date has not yet arrived, most of them have had their effective dates postponed due to major content corrections. EcoProHN was the only one whose report was passed within the scheduled 10 trading days.
The reason for correction
of companies’ reports is that in many cases, supplementation was made because major risks in the business content, such as concentration of customers and progress of each research and development (R&D) pipeline, were not described in detail.
Three companies, including ST Cube, Aptamer Science, and Mirae Industries, submitted their reports in August and have not yet passed the review for over two months.
There are as many as five places that have received requests from the Financial Supervisory Service to submit correction reports. It was rejected because the risks of managed items and delisting were not properly notified or major financial risks (deficit, capital erosion, additional financial changes, etc.) were not sufficiently described.
In the three report corrections, EOflow added the reason for designation as a KOSDAQ managed stock, the results of review of the requirements for exclusion, and the possibility of designation as a managed stock. In other words, it provides investors with a basis for judging whether there are conditions to maintain the listed status. Regarding legal lawsuits that remain uncertain, the expected date for a provisional injunction decision was also stated.
Hysonic and Sensorview also added information examining the possibility of delisting in their correction reports. In addition, we also supplemented the financial review, including performance estimates and basis for estimates, projections of continued deficit, and expected capital erosion rate.
Mirae Industries detailed information related to frequent changes in the largest shareholder, and supplemented the review opinion of an external law firm related to the acquisition of real estate assets, costs that may occur after real estate acquisition, and future financing plans for this.
The Financial Supervisory Service put the brakes on Geumyang’s paid-in capital increase, which had as much backlash in the market as the Korea Zinc case. The company has not yet submitted a correction report.
In the case of Geumyang, despite the controversy over insincere and false disclosures, it pursued a large-scale paid-in capital increase worth 450 billion won, drawing backlash from the market. On September 27, slightly ahead of the paid-in capital increase, Geumyang issued a correction notice regarding the Mongolia mine development investment plan announced in May of last year. Due to the mining operation being delayed from the original plan, the estimated sales figures were revised from KRW 402.4 billion to KRW 6.5 billion, and the operating profit was revised from KRW 160.9 billion to KRW 1.3 billion. It has been reduced by about 1/10. On the 2nd of last month, the Korea Exchange announced that it would designate Geumyang as a corporation with unfaithful disclosure.
Afterwards, Geumyang Chairman Ryu Gwang-ji, seemingly aware of the market’s criticism, announced that he would give 10 million shares to the company for free, thereby trying to extinguish the controversy over damage to shareholder value.
◆Korea Zinc has a lot to explain, including false disclosures, debt, concerns over decommissioning, and impairment losses… Correction seems inevitable
Korea Zinc is also experiencing common issues with companies that have been requested to file corrected returns. Accordingly, the prevailing view is that it will be difficult to pass the Financial Supervisory Service’s review board.
First, Korea Zinc is accused of false disclosure. The Financial Supervisory Service suspects that even though paid-in capital increase was already planned at the time of the previous tender offer, this was not recorded in the tender offer report. Accordingly, an unfair trade investigation task force (TF) has been formed and the investigation has begun.
In addition, the Financial Supervisory Service is also conducting an accounting review of Korea Zinc’s regular reports in relation to market controversies such as excessive debt and stock investment impairment losses.
Of course, the Financial Supervisory Service’s position is that unfair transaction investigation, accounting review, and securities report review are separate tracks. This is because the nature of securities report review does not exclude illegality.
However, the bigger the issue and controversy, the more and more complex the company has to explain to investors. As the reason for the paid-in capital increase decision was mentioned as ‘concerns about delisting due to insufficient number of shares in circulation’, it is highly likely that the Financial Supervisory Service will request a sufficient explanation in this regard. This is an issue that was not stated in the tender offer report.
Ham Yong-il, Deputy Director of the Financial Supervisory Service, said in a briefing on current capital market issues on the 31st of last month, “We will look at whether the securities report is faithfully stated from the perspective of the market,” and added, “The purpose and background of the capital increase, the impact on the company and existing shareholders, and what will happen when this capital increase is
“We will conduct a thorough review using all of our capabilities, including whether it is in line with the stated goal of enhancing shareholder value and whether the related decision-making process is transparently described,” he said.
[서울=뉴시스]
The text you’ve provided seems to be a news article or report regarding the situation surrounding Korea Zinc and the Financial Supervisory Service in South Korea. To improve the clarity, organization, and readability, I have made corrections and adjustments to the structure. Here’s a revised version:
Market Focus: Review of Financial Supervisory Service Actions on Korea Zinc and Geumyang
After reviewing the last three months, it has become evident that most schedules for financial reviews are postponed. The Financial Supervisory Service (FSS) is directly overseeing five locations, including Geumyang, amid controversy surrounding Korea Zinc and allegations of false disclosures.
On November 7, the prosecution investigated allegations of preferential workouts for companies in Gyeongnam, deploying around 30 prosecutors and investigators to search and seize materials from 4 to 5 locations, including the residence of Kim Jin-soo, former assistant director of the FSS, and the FSS office itself.
Current Situation of Korea Zinc
Market attention is now centered on whether Korea Zinc’s substantial paid-in capital increase will successfully pass the FSS’s review board. This capital increase, initiated shortly after a tender offer, has sparked controversy due to potential harm to shareholder value and suspicions of unfair trading practices. Analyzing the recent three-month period reveals that only a very small number of securities reports became effective within the designated timeframe, suggesting that Korea Zinc’s proposal could face significant delays or even rejection.
Financial Supervisory Service’s Scrutiny
According to financial authorities on November 5, the FSS is currently reviewing the securities report submitted by Korea Zinc on October 30. If there are no significant reasons for correction by November 13, Korea Zinc may proceed with the capital increase as detailed in its report. Under the Capital Markets Act, the effective date for a stock offering from a listed corporation is 10 trading days post-submission, or 7 trading days for shareholder and third-party allocations.
However, recent trends indicate that recent securities reports for paid-in capital increases have taken more than a month to become effective, with some reports pending for over two months. This delay often results from the need to correct key contents to protect investors. Companies typically communicate with the Disclosure Review Office at the FSS for any required amendments, but there have been instances of direct rejections from the FSS if a report is deemed to contain significant inaccuracies or omissions.
Out of 19 listed companies submitting securities reports for paid-in capital increases over the last three months (since August), most have faced postponements due to substantial content corrections. EcoProHN is notable as the only company to have its report pass within the expected 10 trading days.
Reasons for Corrections
Many companies have had to provide corrections due to critical risks in business operations, such as customer concentration and the status of research and development pipelines, not being adequately detailed.
Three companies—ST Cube, Aptamer Science, and Mirae Industries—submitted their reports in August but have yet to pass the review after more than two months. Five companies received requests from the FSS for correction reports, primarily because major financial risks were insufficiently described.
For instance, EOflow clarified its status as a managed stock on KOSDAQ, reviewing conditions for exclusion, while other firms like Hysonic and Sensorview elaborated on potential delisting risks. Mirae Industries provided detailed information regarding changes in its largest shareholder and adjustments related to real estate asset acquisitions.
The FSS has recently halted Geumyang’s capital increase amidst considerable market backlash similar to that faced by Korea Zinc. Following a correction notice about projected revenues from a Mongolia mining project—originally expected to generate KRW 402.4 billion but revised to only KRW 6.5 billion—a major backlash ensued, resulting in the classification of Geumyang as a company associated with unfaithful disclosures.
Conclusion: Ongoing Challenges for Korea Zinc
Korea Zinc faces multiple challenges, including allegations of false disclosures, debt issues, concerns over potential decommissioning, and impairment losses. Experts suggest that passing the FSS review board will be significantly challenging. The FSS is investigating claims that Korea Zinc did not disclose plans for a capital increase during its previous tender offer, which has led to the formation of a special task force for investigation.
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