On the filing deadline for quarterly reports, shares of listed companies that experienced a "happening" in which trading in their stocks was suspended and then lifted within a few hours plunged on the 17th. The companies in question were found to have had a poor understanding of the KOSDAQ listing rules of the Korea Exchange (KRX).
On the day, Enchem shares ended at 70,700 won, down 13.89% (11,400 won) from the previous session. KGAA also closed at 3,870 won, down 20.21% (980 won) from the previous session.
The steep declines in the two companies' shares that day were largely due to the aftermath of a trading suspension and subsequent lifting after the close on the 14th.
The KOSDAQ Market Division of the Korea Exchange (KRX) announced earlier on the 14th that it would suspend trading in the stocks of Enchem and KGAA after grounds arose for a substantive review of listing eligibility. The 14th was the deadline for third-quarter quarterly reports for KOSDAQ-listed companies with December year-ends.
Under KOSDAQ listing rules, if separate sales on a quarterly basis are less than 300 million won, it falls under "a case where the main business has been suspended," triggering grounds for a substantive review of listing eligibility. In the case of these two companies, when the initial quarterly reports were filed, quarterly sales were identified as less than 300 million won, which triggered the substantive review and led to a trading suspension.
However, after the exchange checked confirmation letters from the companies and external auditors, it confirmed that third-quarter sales were at least 300 million won. As a result, the trading suspension was lifted in about three hours.
This situation appears to have occurred due to the two companies' lack of understanding of KOSDAQ listing rules. Enchem, a specialized electrolyte maker for secondary batteries, posted consolidated third-quarter sales of 90.3 billion won, but after the cancellation of a supply contract with Dabulda New Materials Co., Ltd. in China, separate third-quarter sales were recorded as minus 6.3 billion won.
An Enchem official said, "Net sales generated by the domestic entity were 12.3 billion won, but minus 18.9 billion won was reflected due to the cancellation of the China supply contract, resulting in separate sales being tallied at minus 6.3 billion won."
For KGAA, an electrode process equipment company that listed on the KOSDAQ market in June through a SPAC merger, some amounts had been omitted from quarterly sales, which were then reflected in a corrected disclosure.
A KGAA official said, "There were some omitted amounts, and we resolved the issue through documentation from the accounting firm," adding, "There was a part where we were not aware that quarterly sales below 300 million won constitute grounds for a substantive review."
An exchange official said, "For semiannual reports, verification is done through a review report by the external auditor, but quarterly reports are done through internal settlement of account, so listed companies sometimes have omissions," adding, "For the two companies, a lack of understanding of the rules was the cause."
Meanwhile, companies that did not file quarterly reports on the 14th included Quantumon, IM, and Sunshine Food. These three companies had already received delisting decisions, so they are believed not to have filed quarterly reports.