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(News Focus) Samsung BioLogics case to affect market, delisting unlikely: experts

All Headlines 12:21 November 15, 2018

By Oh Seok-min

SEOUL, Nov. 15 (Yonhap) -- The move to suspend Samsung BioLogics Co. trading could raise volatility for related firms, but chances are slim that the biopharmaceutical giant will be ejected from the stock market, experts here said Thursday.

On Wednesday, South Korea's Financial Services Commission (FSC) ruled that the bio firm affiliated with the local conglomerate Samsung intentionally violated accounting rules ahead of its initial public offering in 2016, and referred the case to the state prosecutors' office.

Immediately after the announcement, the Korea Exchange (KRX) halted trading of the company's shares, and kicked off a 15-day review session to decide whether to send the case to its corporate assessment committee for a ruling on possible delisting. If necessary, the bourse operator can have 15 more the review the violation.

The committee then would have 20 days to make the delisting decision, as well as the duration of its trading suspension that can allow firms to make corrections.

If the bourse operator decides to force the bio firm off of the stock market, Samsung BioLogics can file an objection within seven days.

"Up to 57 days of trading suspension mean that uncertainties regarding Samsung BioLogics can weigh down the market," Koo Wan-sung, an expert at NH Investment & Securities, said.

Forecasting that the case will likely "cool down investor sentiment," Kim Hyeong-ryeol, an expert at Kyobo Securities, said a high level of distrust in the overall bio industry "could even lead to pessimism over the local stock market as a whole."

As of Wednesday, the market capitalization of Samsung BioLogics came to 22.1 trillion won (US$19.53 billion), which is the sixth-largest in the main KOSPI market.

(News Focus) Samsung BioLogics case to affect market, delisting unlikely: experts - 1

The consensus among experts was that there is not a high chance of the company being thrown off of the market.

"The FSC's ruling has largely been anticipated, and institutional investors do not seem to take the decision as a fresh development," Jin Hong-kook, an analyst at Korea Investment & Securities, said.

He also pointed out that the KRX has reviewed 16 delisting validity requests of 16 KOSPI firms over accounting mishaps so far, but none has ever been delisted.

"Starting two days ahead of the regulator's final ruling, the bio firm's shares had surged, which can be taken as indicating that investors expect this case to stop short of the delisting," he claimed.

Shares of Samsung BioLogics spiked 9.81 percent on Tuesday, and 6.7 percent on the following session to finish at 334,500 won. The FSC's ruling was announced after the stock market closed on Wednesday.

Citing the country's listing rules, Hong Ga-hye of Daeshiin Securities echoed the opinion.

"Key criteria in deciding a company's eligibility of going public include corporate consistency, managerial transparency and efforts to achieve public interest and protect investors, and Samsung BioLogics would not fail in these areas," she stated.

Some analysts were optimistic with regard to how the Samsung incident could reduce uncertainties for other companies.

"In September, the financial regulator came up with clear supervisory rules for biotech and pharmaceutical firms, and now that Samsung case has made progress. So the accounting-related issues, which have been a major obstacle to local bio firms, are now very much resolved," said Seon Min-jung from Hana Financial Investment.

"Short-term volatility would be unavoidable, particularly for small-sized biopharmaceutical companies, but the regulator's ruling helped clear up uncertainties," the analyst said.

As of 11 a.m. on Thursday, the KOSPI had shed 0.22 percent to trade at 2,063.23. Samsung C&T, which is the bio unit's largest shareholder, sank 3.79 percent to 101,500 won.

(News Focus) Samsung BioLogics case to affect market, delisting unlikely: experts - 2


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