KOSDAQ-listed company MEDICOX is facing delisting due to embezzlement and breach of trust by former executives. The prospects for some individual investors who had engaged in buying amid the sharp fluctuations in MEDICOX's stock price have become uncertain.
On the 22nd, the Korea Exchange reported that MEDICOX disclosed the embezzlement and breach of trust of six former executives and one subsidiary executive the day before. They are suspected of making false disclosures about purchasing shares of a real estate development company, which they received for free, for 5 billion won when funds for MEDICOX's third-party allotment of a capital increase were insufficient, and of incurring losses by acquiring convertible bonds (CB) of a real estate development company not needed for MEDICOX and using them privately. They are also accused of falsely registering family members or acquaintances as MEDICOX employees and improperly using corporate credit cards.
The amount of embezzlement for those indicted is about 16.4 billion won, which accounts for 27.51% of MEDICOX's equity of 59.4 billion won. Including the two fleeing chairpersons, the total amount of embezzlement and breach of trust is reported to reach 52 billion won.
The Korea Exchange plans to conclude whether MEDICOX is subject to substantive review for listing eligibility by August 11. According to KOSDAQ listing regulations, if 'substantial embezzlement and breach of trust allegations are confirmed through disclosures,' they undergo substantive review procedures for listing eligibility, which may result in delisting, maintaining listing, or granting a period for improvement.
Although trading of MEDICOX shares has been suspended, this trading suspension occurred nearly three months after the embezzlement and breach of trust incident came to light. The prosecution executed a search warrant for MEDICOX on April 24, bringing the issues surrounding the former executives to the forefront. On the same day, MEDICOX's stock price hit the lower limit (the lowest price cap for the day).
MEDICOX's stock price recorded another lower limit on May 9, when the company disclosed the fact that it was under investigation by the prosecution. Two trading days later, on the 13th, it hit a low closing price of 104 won. However, it did not lead to a trading suspension. The impact of MEDICOX issuing an 'undetermined' disclosure at that time was significant. MEDICOX stated that it is currently verifying details regarding the search and that it will take appropriate measures, including disclosures, as soon as there are any confirmed findings.
MEDICOX's stock price has been on a rollercoaster. From May 14 to 16, the stock price climbed by 118% to 227 won, achieving the upper limit (the highest price cap for the day) for three consecutive trading days. However, following a peak intraday price of 310 won on the 27th of the same month, it declined sharply, halving in value.
MEDICOX has been in a state of trading suspension since the 3rd, prior to the substantive review process for its listing eligibility by the exchange. This was due to MEDICOX's decision to consolidate common shares, merging 15 shares into 1 for capital reduction to offset losses.
As of the 2nd of this month, individuals had net purchased MEDICOX shares worth 3 billion won since the prosecution's search. Considering that MEDICOX's market capitalization does not even reach 20 billion won, this is a significant amount.
Consequently, the Korea Exchange's actions have been deemed reactive. It is reported that the Korea Exchange had considered various measures internally, but there was not much it could do before the indictment was issued.
The fluctuations in MEDICOX were not sudden. The largest shareholder changed several times, and the company failed to escape from deficits, repeatedly engaging in capital increases, reductions, and bonus issues. MEDICOX's stock price has also continued to decline since peaking at 32,612 won on April 3, 2018. Based on the latest closing price of 153 won prior to the trading suspension, the average purchase price of 1,260 MEDICOX investors linked to the Naver Pay "my asset" service is 3,498 won, resulting in a valuation loss rate of 95.63%.