The payment date for Kumyang's rights offering, which is at risk of delisting, has been postponed once again. Since announcing the rights offering plan in Jun., the payment date has been delayed twice. As the planned fundraising schedule keeps getting pushed back, shareholder concerns are growing. If the rights offering schedule is delayed further, there is also a possibility that the Korea Exchange will again sanction the company as an unfaithful disclosure entity.
Kumyang recently issued a correction disclosure regarding the payment schedule for the rights offering. External investment funds were initially scheduled to be paid on the 3rd, but the date was postponed to the 17th. The correction disclosure came out on the very day the investment was supposed to be received.
This is the second time Kumyang has postponed the rights offering schedule. Earlier, on Jun. 4, Kumyang announced a rights offering plan to issue new shares to the Saudi Arabian firm "Skyve Trading & Investment" to raise 405 billion won, but the original payment date was moved from Aug. 2 to the 3rd of this month.
Under current rules, if the payment date for a rights offering is delayed beyond a certain period or the amount of the rights offering changes, the company may be subject to sanctions for unfaithful disclosure. A Korea Exchange official said, "If the payment date is delayed by six months or more, or if the rights offering amount changes, it constitutes a 'disclosure change' and the company may be sanctioned for unfaithful disclosure."
Because the initial rights offering decision was made on Jun. 4, if funds are not paid in after Dec. 4 this year, or if the rights offering amount is reduced, it becomes subject to a disclosure change and the company may be designated as an unfaithful disclosure entity. If the rights offering plan is canceled, it also becomes subject to sanctions for disclosure reversal.
Kumyang was designated an unfaithful disclosure entity in Mar., bringing its cumulative penalty points to 17. Under the Korea Exchange Main Board listing rules, if a company designated as an issue under management accumulates 15 or more additional penalty points for unfaithful disclosure in the past year, or if it is designated an unfaithful disclosure entity for intentionally or grossly negligently violating disclosure obligations on matters that could have a significant impact on corporate management, it may become subject to a substantive review of listing eligibility.
Kumyang said, "In order to receive the investment payment as soon as possible, an executive in charge visited Saudi Arabia in early Aug. to confirm Skyve's investment commitment, and in mid-Aug., Skyve's CEO visited Korea to reconfirm the intention to invest in the company." However, Kumyang noted, "The process of sending Saudi Arabian funds overseas (to Korea) has not gone smoothly, so even on the payment date, the 3rd, the payment was not completed into our account," adding, "We will do our best to assist the investor so that the investment funds are paid in as quickly as possible."
Kumyang is in urgent need of financing to keep the company going. Kumyang received a "disclaimer of opinion" on its financial statements from an external auditor last year and has been suspended from trading. In the first half of this year, it also received a "disclaimer of review conclusion" from its auditor. As of the first half of this year, Kumyang's current liabilities exceeded its current assets by 626 billion won.