On the first day of consecutive limit losses, on the 4th of this month, medical device manufacturer EoFlow’s CEO's family and some executives sold their shares. EoFlow dropped to the price limit from the 4th to the 6th due to the possibility of losing a lawsuit against U.S. medical device company Insulet, and also fell by 28.25% on the 9th. In other words, the CEO's family and executives sold shares just before the stock plunged to the limit, while trading was still possible.
According to the Financial Supervisory Service's electronic disclosure system on the 13th, Kim Jae-jin, EoFlow’s CEO, and his wife, Kim Angela Shin, sold 141,900 shares at 8,010 won each on the 4th. This amounted to 1.136662 billion won.
Kim Jae-jin's brother, Ahn Jae-hee Kim, also sold 76,926 shares at 10,100 won each on the same day, making a total of 776.95 million won.
EoFlow executives also sold their shares during the same period or subsequently repurchased them at lower prices. Ahn Hyun-deok, Chief Financial Officer (CFO), sold all of his 19,085 shares at 3,770 won each on the 6th, cashing in 71.95 million won.
Kim Chang-jung, Chief Operating Officer (COO), and Jeon Jun-seong, Senior Advisor, sold a total of 19,284 shares and 19,148 shares at 10,100 won each on the 4th and then repurchased them the next day at 5,380 won each. They made profits of 118.25 million won and 88.50 million won respectively within one day.
EoFlow announced on the 4th that jurors favored Insulet in an ongoing lawsuit regarding 'overseas intellectual property infringement and unfair competition' being held at the U.S. District Court in Massachusetts. Insulet previously claimed that EoFlow's wearable insulin pump, the EoPatch, infringed on its patent.
After news that EoFlow may be liable for damages amounting to $452 million (approximately 633.7 billion won)—which is 877% of its equity of 72.3 billion won—its stock price plummeted by 75%, from 10,960 won to 2,705 won, over four trading days from the 4th to the 9th. During this period, foreign investors and institutions sold a net worth of 2.3 billion won and 700 million won respectively, while individuals purchased a net worth of 5.1 billion won.
Some shareholders raised suspicions that company officials hurriedly sold their stocks knowing insider information in advance. This is because executives and related parties who have quicker access to internal information sold their shares as the stock price began to plummet.
Critics also pointed out that insiders, who are responsible for maintaining corporate value and overcoming crises as major stakeholders, took advantage of stock price volatility through stock trading in a negative situation.
EoFlow decided to retract its plan for a 38.5 billion won capital increase announced in August due to the aftermath of the stock price crash. On the 6th, EoFlow submitted a notice of capital increase retraction to the Financial Services Commission.
EoFlow noted, 'Given that the jury verdict recognized EoFlow’s infringement of trade secrets in the lawsuit regarding U.S. patent infringement and unfair competition filed by the competitor Insulet, we decided to retract the capital increase, as it could cause confusion for existing shareholders and new investors.'