Investors are growing concerned as Jeil M&S, a secondary battery corporation that has been listed for less than a year, is included in the list of companies that have failed to submit their audit reports on time. The company explained that the delay in submission was due to a late response to loss data related to the bankruptcy of its major customer, European battery manufacturer Northvolt.
According to the Korea Exchange on the 25th, a total of 49 listed companies have filed for extensions of their business report submission deadlines or disclosed delays in audit report submissions as of the previous day. This includes 8 companies in the securities market and 41 in the KOSDAQ.
Among them, Jeil M&S stands out as it is recognized as one of the top three domestic manufacturers of mixing equipment for secondary batteries. It is also an 'initial public offering' company that entered the KOSDAQ market on April 30 of last year. Some suggest that the fact the company is delaying its first audit report indicates a greater risk to its financial soundness.
Typically, corporations can request an extension for their audit and business reports once a year; however, they maintain submission deadlines to avoid creating unnecessary adverse impacts. This is because investors may perceive issues in the company's accounting audit process. Companies that disclosed delays have had their submission deadlines pushed to the 7th of next month, but if they still fail to submit by then, they will be designated as management issues. If the non-submission continues for more than 10 business days, the grounds for delisting will arise.
The auditing firm responsible for auditing Jeil M&S noted that the company did not submit the necessary materials on time to provide an audit opinion. This is significantly impacted by the accounting treatment related to the bankruptcy of Swedish company Northvolt last year. Northvolt is a major customer of Jeil M&S and had entered into a long-term supply contract in 2020.
Jeil M&S stated in its investment prospectus at the time of listing last year that the risk of uncollectible receivables was not significant. However, after Northvolt went bankrupt amid a financial crisis in November of the same year, hundreds of millions of won in receivables were incurred. The bad debt expense related to the fourth quarter of last year amounted to 58.7 billion won.
As a result, the company recorded its largest-ever revenue of 442.9 billion won last year, but it turned to a loss with an operating loss of 46.4 billion won. Due to reduced operating funds, it even issued a first series convertible bond (CB) worth 19 billion won for the first time since its listing last month.
A representative from Jeil M&S explained, "The delay in the audit schedule this year is partly due to a late start, and the losses related to Northvolt were significant, leading the auditing firm to request detailed information, causing delays in submissions," adding that "the CB was also pushed forward as a contingency plan to respond to new orders."
Shareholders are expressing concerns that if the audit report includes a 'disclaimer of opinion' due to the already significant drop in stock price, they may face even greater losses. In fact, Jeil M&S's stock price exceeded the offering price (22,000 won) in the week following its listing, but has since sharply declined, falling 75% to 5,590 won as of the 24th. Financial investors (FIs) like Korea Investment Private Equity and SKS Private Equity, who invested before the company went public, have not yet exited (recovered their investments). Currently, Korea Investment 2022 Private Equity Limited Partnership (11.87%) and SKS Korea Investment No. 1 Private Equity Limited Partnership (9.96%) are noted as major shareholders of the company.
Jeil M&S posted an apology to shareholders the previous day, stating, "We sincerely apologize for causing deep wounds and concern to our shareholders due to the delay in submitting the audit report," and added, "There are absolutely no legal issues as some shareholders are worried about."
Additionally, issues such as rebates were discovered during the contract process with external organizations, which delayed the audit schedule, and regarding rumors that the related sales director had resigned at the end of last year, the company clarified that "this is completely unfounded." The company representative stated, "The executive was a registered officer and became an unregistered director this year, and is still working," asserting that "the rumors are entirely false."