This article was posted on the ChosunBiz MoneyMove site at 3:39 p.m. on March 24, 2025.
Some of the senior creditors of the secondary battery corporation Kumyang, which received a notification of "opinion denial" regarding the audit report from last year, have been revealed to be personal companies of Chairman Ryu Kwang-ji.
In the worst-case scenario, even if Kumyang goes bankrupt, the largest shareholder Ryu will have some degree of recovery compared to the shareholders. This personal company has already made several hundred billion won in profits by buying and selling Kumyang's equity.
According to the Financial Supervisory Service’s electronic disclosure system on the 24th, Kumyang borrowed 57.7 billion won and 10.8 billion won from KJ International and KY Eco, respectively. The interest rate is 4.5% per annum. Both companies are personal companies where Chairman Ryu holds 100% equity directly or indirectly. Additionally, Kumyang is currently in a state of short-term borrowings of 229.8 billion won through bond-secured loans and trade finance.
Kumyang announced on the 21st that the denial of the audit opinion constituted a reason for delisting. The auditor pointed out that Kumyang recorded a net loss of 132.9 billion won last year and that its current liabilities exceed its current assets by 634.1 billion won, raising concerns about its viability as a going concern. According to exchange regulations, a listed company can be delisted if it receives an "inadequate or opinion denial" audit opinion or if it has received a limited opinion for two consecutive years.
It is presumed that Chairman Ryu did not lend funds to Kumyang to engage in "money play," i.e., making interest profits. The interest rate of 4.5% is not considered particularly high. However, shareholders are viewing the transactions between Chairman Ryu's personal companies and Kumyang with skepticism, as his personal company previously made significant profits from trading Kumyang's stocks.
◇ Chairman Ryu earns 276 billion won by buying and selling Kumyang's equity through his personal company
Chairman Ryu's ability to raise hundreds of billions of won for Kumyang stemmed from having bought and sold Kumyang's equity earlier through KJ International and KY Eco, earning capital gains of 173 billion won and 103 billion won, respectively. Currently, he has 1.44% and 2.41% of the equity obtained from participating in the third-party allocation of paid-in capital increase in November 2024.
KJ International began acquiring Kumyang's equity in early August 2018. The purchase price at the time of the first acquisition was 2,200 won. KJ International purchased 1,790,207 shares of Kumyang for 4.344 billion won by the end of March 2021. In terms of average purchase price, it amounts to 2,427 won.
KY Eco bought convertible bonds (CB) of Kumyang for 3 billion won in 2021. Shortly after, it exercised its conversion rights and received 1,165,048 shares. The purchase price per share was approximately 2,575 won.
As Kumyang's stock price rose, the two companies gradually began selling their shares. In July of the same year, Kumyang's stock price peaked at 194,000 won before gradually declining. Last October, KJ International sold 800,000 shares of Kumyang, while KY Eco sold 700,000 shares in after-hours trading. The disposal price was 95,841 won, resulting in about 40 times the capital gains. KJ International gained 76.6 billion won, and KY Eco earned 67 billion won.
Subsequently, KJ International sold another 750,000 shares at the end of last year. The disposal price was 107,323 won, and KJ International acquired 80.5 billion won. Five months later, KJ International and KY Eco disposed of all their remaining equity in Kumyang. KJ International sold 240,207 shares, while KY Eco sold 465,048 shares at 84,264 won per share. The funds accumulated in this manner again directed towards Kumyang in the form of short-term borrowings.
Following the denial of the audit opinion, stock trading related to Kumyang was suspended. Shareholders, who never anticipated such a denial, are now in a state of panic. A corporation that once had a market capitalization exceeding 9 trillion won has shrunk to 600 billion won and now faces the risk of becoming worthless. Just before the denial of opinion, Chairman Ryu brought a shareholder delegation to Mongolia to alleviate concerns about the Mongolia Monglag mine, which has worsened the shock for shareholders.
Meanwhile, Kumyang posted an apology regarding the denial of the audit opinion on its website. Kumyang stated, "We sincerely apologize for causing concern to our shareholders" and added, "We are continuously consulting with domestic and overseas investment institutions to secure capital and are currently working to derive meaningful and visible results."