The transaction of Soldefense (formerly Hucentech), which produces defense components, has resumed. This is the first time in over three years since the transaction was suspended in 2022. As the long-held transaction was released, the stock price fluctuated wildly. On that day alone, the volatility mitigation device (VI) was activated five times.
Similarly, Joosung Corporation, whose transactions on the Korea Composite Stock Price Index (KOSPI) resumed after five years, experienced dramatic fluctuations. As trading resumed after several years, many existing shareholders sold their shares, while investors focused on the revived company began to accumulate, increasing the volatility of the stock price.
Although it has been over a month since the transaction of Joosung Corporation resumed, the stock price continues to show significant fluctuations. Soldefense is also expected to see rapid stock price fluctuations for the time being. During the prolonged period without trading, the value of the listed company changed, and the process of the stock price reflecting this coincided with speculative trading aimed at short-term profits.
The KOSDAQ market division of the Korea Exchange stated that on the 8th, the Corporate Review Committee held a meeting and decided to maintain the listing of Soldefense shares. Consequently, trading of Soldefense resumed on the 9th.
With the transaction resuming, the stock price moved significantly. Three years ago, the price of Soldefense shares was suspended at 1,400 won, but after trading resumed that day, it rose to 1,555 won and ultimately closed at 1,124 won, nearly a 20% drop. The trading volume reached 12.1 million shares.
The significant fluctuations in Soldefense’s stock price on that day were actually anticipated. This was due to the lengthy suspension of transactions and the emergence of issues that impaired corporate value, such as opaque accounting problems and allegations of embezzlement and breach of trust by the management during the period without stock trading.
Soldefense, which went public through a merger with a special purpose acquisition company (SPAC) established for the purpose of corporate acquisition, faced frequent changes in major shareholders and business instability since its listing, landing it in a situation of potential delisting in 2022. An external auditor issued a 'disclaimer of opinion' on the 2021 financial statements.
In 2021, Soldefense's annual net loss exceeded 30 billion won, while current liabilities were 52 billion won more than current assets. The financial situation deteriorated sharply, but there was no substantial funding plan in place, and options for generating revenue were limited.
The suspension of stock trading made external financing even more difficult, but Soldefense worked hard to avoid delisting. First, it filed an objection to the delisting with the Korea Exchange and was granted a period for improvement, after which it received a 'fair' audit opinion from an external auditor regarding its 2022 financial statements.
Hyundai Accounting Corporation, which performed the external audit for that year, initially expressed a 'disclaimer of opinion' due to limitations in the scope of the audit of the basic financial statements and the inability to secure audit evidence regarding the legitimacy of the company's investment transactions and their recoverability. However, the company later rectified issues related to unrecorded illegal activity uncollectibles and misprocessed financial product accounting errors, leading the external auditor to issue a fair opinion on the financial statements.
Based on this, the company submitted an improvement plan to the Korea Exchange. Consequently, the formal grounds for delisting were resolved.
However, during that time, allegations of embezzlement and breach of trust against the former management arose, and with changes in major shareholders, the company became subject to substantive review for listing eligibility, resulting in the continued suspension of transactions. Recently, regarding the allegations of embezzlement and breach of trust, the prosecution concluded that there was no basis for the allegations due to insufficient evidence, and the company submitted a report on the implementation of the improvement plan.
The Corporate Review Committee of the Korea Exchange decided to maintain the listing of Soldefense. However, the exchange stated, 'The committee's decision is merely a judgment on listing eligibility according to regulations.' This means that investors should independently assess the company's profitability or growth potential. Given the changes in corporate value during the trading suspension, the stock price will inevitably experience substantial movements for the time being.
According to Soldefense's business report, the main revenue sources for the company's products are Hanwha Aerospace and Hanwha System. Over the past three years, revenue has increased, leading to 21.8 billion won in sales last year, with a net profit of 11 billion won.
The largest shareholder is Mr. Um Jae-seok, who invested 75% in the unlisted company Ggeunsol, along with associated parties (27.4%), stating that the largest shareholder would retain the equity for three years after the resumption of transactions.