This article was published on March 31, 2025, at 4:03 p.m. on the ChosunBiz MoneyMove site.

As trading of Kumyang's stocks was halted on the securities market, venture capitalists (VCs) who invested in SM LAB, a subsidiary of Kumyang that develops secondary battery cathode materials, are facing difficulties. This comes as SM LAB failed to pass the threshold for an initial public offering (IPO) last year, and now Kumyang, which was a source of support, is in crisis.

According to the Financial Supervisory Service electronic disclosure system on the 31st, Kumyang disclosed that a reason for its delisting occurred due to a refusal of the auditor's opinion on the 21st. The auditor explained that Kumyang recorded a net loss of 132.9 billion won last year, and that current liabilities exceed current assets by 634.1 billion won, making the continuation as a going concern uncertain.

With the halting of trading for its largest shareholder Kumyang, the investment sentiment towards SM LAB is expected to worsen. SM LAB is in a situation where it needs additional investment to prepare for its IPO. The Korea Exchange did not grant a special listing approval at the end of last year, citing concerns over the instability of SM LAB's funding plans for facility investment.

SM LAB, which has been facing continued losses, has been receiving financial support from Kumyang. Last April, it borrowed 40 billion won from Kumyang for a term of three years. Considering that SM LAB recorded a deficit of 17.7 billion won by the third quarter of last year, this is a significant amount. The timing for the lending is in the second half of this year. Kumyang’s acquisition of SM LAB in 2023 also proceeded in the form of new share issuance, effectively serving as fundraising.

The accumulated investment in SM LAB amounts to 100 billion won, excluding the payment for Kumyang's new share issuance. Major investors include Withwin Investment, Stick Ventures, Korea Investment Partners, and DSC Investment. Additionally, Korea Development Bank, KT&G, Hanyang Securities, Murex Partners, Our Venture Partners, SV Investment, K&Investment Partners, and Schmitt are also investors.

An industry insider said, “VCs that invested through blind funds may fare better if the returns from other investments in the fund are high, but VCs that invested through project funds will be in a tougher position.” They added, “While the chances are low, they might have had some hope that Kumyang could buy their equity as a strategic investor.”

Founded in July 2018, SM LAB is a startup created by Cho Jae-pil, a professor of energy and chemical engineering at the Ulsan National Institute of Science and Technology (UNIST). The company secured mass production technology for single-crystal cathode materials that could replace the widely used lithium iron phosphate (LFP) and nickel-cobalt-manganese (NCM) cathodes, generating significant expectations in the industry.

At the time of the last fundraising, the company was valued at 400 billion won, but the first attempt at listing fell through, complicating the situation. In 2022, the U.S. Federal Reserve sharply raised interest rates, causing the stock market to collapse, and SM LAB voluntarily withdrew its preliminary listing application from the KOSDAQ.

Another insider in the investment banking sector explained, “While the stock market was unfavorable at the time of the first listing attempt, the exchange was concerned that SM LAB had not secured a proper revenue source,” adding that “the value chains of existing electric vehicle-related companies were already consolidated, making it difficult for SM LAB to find a place to supply its products.”

From July to November 2023, Kumyang secured 22.31% equity in SM LAB with an investment of 115 billion won. At that time, Kumyang stated that the purpose of acquiring equity in SM LAB was to secure a supply chain for second battery cathodes and enhance cost competitiveness as part of building a second battery value chain.