Mid-sized company SOLUM is suffering from allegations of internal transactions involving the owner's family. Some shareholders are strongly opposing SOLUM's practice of funneling work to a company established by CEO Jeon Seong-ho's family and their acquaintances, leading to abnormal capital outflows. In a shareholder letter, SOLUM stated it would reassess its internal compliance and is expected to release an additional statement soon.
According to sources within and outside the company, SOLUM has established several companies related to Chairman Jeon Seong-ho, his eldest son Executive Director Jeon Dong-wook, his second son Executive Director Jeon Se-wook, their spouses, and acquaintances, thereby creating abnormal cash flows into the company through methods such as the interior of a new office building and onsite restaurant management services.
A notable example is NaSeom, a company co-directed by Chairman Jeon Seong-ho's wife, Ha Eun-sook, and his brother Jeon Seong-do, which transferred a property worth 5.2 billion won to SOLUM last year. After disposing of the said property to SOLUM, NaSeom ceased operations. SOLUM did not initially report its transactions with corporations established by related parties in its business reports, but recently corrected last year's reports due to rising controversies.
An acquaintance of Executive Director Jeon Se-wook also secured considerable work from SOLUM. Companies such as WiStar, which handled the interior of SOLUM's new office building, WiStar CNS, which won maintenance work, and WiStar Assets, which operates a dining business in SOLUM's office, have all been confirmed to be companies represented by Kim Jae-hyung, a college classmate of Executive Director Jeon Se-wook.
Some shareholders point out that such internal transactions by SOLUM resemble a practice known as 'tunneling,' where profits from a listed company are transferred to unlisted companies owned by major shareholders. A company official said, "It is estimated that at least 10 billion won of company funds have been transferred to companies related to the owner family through such inappropriate internal transactions."
As multiple allegations of internal transactions have emerged, SOLUM's turmoil is closely related to its share price recently hitting the lowest level since its listing. Established in 2021 on the Korea Composite Stock Price Index, SOLUM traded at around 20,000 to 30,000 won shortly after its initial public offering price of 17,000 won; however, its stock price has been declining since last year, recently trading at 15,000 to 16,000 won.
SOLUM was established in 2015 as an employee-owned company, with over 55% of shares held by employees, excluding the former CEO, when the Samsung Electro-Mechanics division became independent. Although new investment has flowed in since its listing, many who are well-acquainted with the company's internal situation remain shareholders.
SOLUM expressed its intention to inspect the various allegations raised this time and strengthen its internal compliance. In a recent shareholder letter, SOLUM stated, "We are conducting a thorough compliance evaluation concerning the related party transactions in question, including the headquarters and subsidiaries," adding, "We will refine the relevant systems, organizations, and procedures."
A senior official at the company noted, "While some of the allegations are factually unfounded, we confirmed aspects that need improvement," and added, "A review of overall management to ensure compliance appropriate for a listed company is underway."
Meanwhile, the personnel partitioning related to succession, which the company has stated is "groundless," seems to have been originally pursued but is now stalled. Initially, SOLUM planned to establish a holding company following the partitioning this November. Since last year, SOLUM has been preparing for the establishment of a holding company and for second-generation succession through spin-offs.
However, amid amendments to commercial laws aimed at enhancing the rights of minority shareholders since the new government took office, the atmosphere changed as listed companies like PharmaResearch and HANA Micron, which had previously attempted spin-offs similar to SOLUM's plan, have consecutively withdrawn their plans.
A company official stated, "While it is true that we considered a spin-off in the past, it is impossible to proceed given the significant backlash from shareholders," and added, "As previously disclosed, it is not true that spin-offs or succession operations are being pursued."