Once a battery giant, Kumyang faces delisting crisis

Kumyang displays its cylindrical batteries at a battery exhibition in COEX convention center, Seoul, March 5. Yonhap

Just about two years ago, Kumyang was a retail investor favorite, boasting a market capitalization of close to 10 trillion won ($6.7 billion).

The success was short-lived. Today, the secondary battery stock faces the risk of delisting.

According to the Korea Exchange, Kumyang's trading has been suspended since March 21 after the company received a disclaimer of opinion in its audit report. As of Monday, its market capitalization stood at 633.3 billion won, marking a staggering 93 percent decline from its peak in July 2023.

Hanul LLC, the company’s auditor, said there is "significant uncertainty that casts substantial doubt on the company’s ability to continue as a going concern" while declining the audit.

Where did it all go wrong?

Founded in 1978, Kumyang shifted its focus in 2020 from producing foaming agents and chemical products to entering the secondary battery sector. Fueled by the hype surrounding the industry in 2023, it quickly rose to the center of the retail investor boom.

However, its overambitious business expansion led to its downfall. Kumyang made large-scale investments and channeled funds into mining projects in Mongolia and Congo, along with the construction of a battery plant in Busan.

To finance these plans, the company approved a 450 billion won capital increase last September. The plan faced intense backlash from shareholders, with the market forecast deteriorating in the second half of 2023. The company ultimately scrapped the financing plan in February.

The most recent blow came when Kumyang received a disclaimer of opinion in its audit report, prompting the suspension of stock trading. The deadline to submit an appeal is April 11. If the company does not file an appeal, the delisting process will proceed.

Whether Kumyang can stage a turnaround remains uncertain.

Industry watchers believe the company will struggle to maintain its listing or achieve any meaningful stock price recovery unless there is a revival in its secondary battery business. Kumyang posted a consolidated operating loss of 14.6 billion won in 2022, which deepened to 56 billion won in 2023.

Questions have also arisen over its cylindrical battery technology, which Kumyang has highlighted as a key focus in its future business strategy. The company has repeatedly announced plans to begin mass production within this year, yet no tangible results have materialized to date.

"There is a real possibility of delisting of this stock. The Korea Exchange is becoming more serious about delisting shady companies, especially one that receives inappropriate audit opinions for two consecutive years," Douglas Kim, an analyst at SmartKarma, a Singapore-based investment research firm, said.

Kumyang has apologized to investors, stating it will "take all necessary measures to quickly secure investment, resolve the issues behind the auditor’s disclaimer and resume trading."