Scandal-hit Osstem facing delisting crossroads

Osstem Implant's headquarters in Seoul / Courtesy of Osstem Implant

Over 1,500 investors prepare to file class-action suit against dental implant maker

By Yi Whan-woo

Osstem Implant, hit by a massive embezzlement scandal, is at a crossroads facing a possible delisting, with the Korea Stock Exchange (KRX) scheduled to decide by Jan. 24 at the earliest whether the dental implant maker's shares can be allowed to resume trading after being indefinitely suspended.

The decision will come amid snowballing fears among the shareholders of Ossteem that they would lose the money they invested in the firm, over the alleged embezzlement of millions of dollars from Ossteem funds, committed by an employee.

The amount, 188 billion won ($157.9 million), is believed to be equivalent to 91.81 percent of Osstem's equity capital of 204.76 billion won. The case is the largest-ever embezzlement case in the history of the country's listed firms.

Osstem promised that it will make "all-out efforts" to retrieve the money and resume stock transactions, after the KRX, the country's bourse operator, suspended its shares from the secondary KOSDAQ market over the scandal, which was made public through the company's regulatory filing on Jan. 3.

More than 1,500 minority shareholders of Osstem, however, find the dental implant maker's measures inadequate. They accordingly are preparing to file a class-action suit against the company.

"Against this backdrop, the KRX will decide if it is appropriate to resume stock transactions, after thoroughly going over the company's balance sheets, management and other factors that could have a grave impact on business transparency and protection of the rights of investors," the KRX said in a statement.

The KRX is looking into whether Osstem needs an eligibility review that will decide whether to allow the shares to resume trading, delist the firm or grant it an improvement period. This deliberation could be extended an extra 15 days.

The suspension will be lifted and the trading will begin again from Jan. 25, if the bourse finds the Osstem stocks qualified to do so.

On the other hand, the ban on trading will remain effective for up to one year if the KRX judges that the trading can only restart after improving certain required conditions.

The possible delisting will require the ultimate consent of the KRX's Market Oversight Committee.

The minority shareholders are expected to move forward with their actions based on the Jan. 24 outcome.

They are likely to seek compensation regardless of the outcome, while the amount of compensation they seek will vary depending on the situation.

"We will be able to estimate the amount of loss we have suffered once trading resumes," a lawyer jointly hired by the shareholders said, noting that the stock price is most likely to decline after its return to trading.

"In the case of a prolonged suspension and delisting, calculating our losses will be much more complicated," he said.

Meanwhile, the KOSDAQ has been going through a massive foreign investor sell-off since the start of the year, which market observers say is linked to the Osstem embezzlement case.

Foreign investors dumped a net 1.33 trillion won worth of shares on the junior bourse between the first trading day of the year on Jan. 3 and Jan. 15.

The tech-heavy market retreated to the range of 970, after closing at 1,033.98 at the end of 2021.

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