Domestic railcar maker Dawonsys is facing criticism for damaging shareholder value by spinning off a promising business unit and transferring control to a private company owned by the owner family. After recently receiving a harsh rebuke from the government over delays in railcar deliveries and advance payment issues, investor distrust is deepening as a governance controversy over the transfer of a core business unit has now been added.
According to the Financial Supervisory Service's electronic disclosure system on the 31st, Dawonsys said in a disclosure last month that its equity stake in "Dawon Powertron," which had been a 100% subsidiary, had fallen to 46.73%.
Dawon Powertron is a new corporation established in June this year when Dawonsys transferred its semiconductor power supply unit (PSU) through a business transfer. Although it was a wholly owned subsidiary of Dawonsys at the time of its establishment, its status changed to an affiliate in just three months.
A third-party paid-in capital increase lies behind this change in equity. HB Investment and "Dawon Universe" participated as major shareholders in this capital increase. The problem is that Dawon Universe is effectively a private company, with Dawonsys CEO Park Seon-sun and Park's son Park Byung-ju registered as directors. The minority shareholders' alliance is strongly criticizing this as a textbook case of "tunneling (expropriation of corporate value)," in which the owner family uses an unlisted company to siphon off profits from a listed company's prime business.
An official with a shareholders' alliance said, "We have invested in Dawonsys for a long time in view of core businesses such as semiconductor power supplies, but the company separated the core business without sufficient explanation to shareholders and then had the owner family secure control of the entity through a private company," adding, "As a result, existing shareholders' control over the core business is structurally bound to weaken."
Questions are also mounting over how the funds raised through past paid-in capital increases were used. Dawonsys disclosed in 2022 that it would inject a total of 42.8 billion won into its semiconductor business, including 5 billion won for semiconductor facility investment and 37.8 billion won for materials and supplies purchases, through a paid-in capital increase. However, that semiconductor business was subsequently transferred to the newly established Dawon Powertron, and the equity stake of Dawonsys, the parent corporation, has fallen to below half.
In particular, of the 15 billion won earmarked for facility funds, only 3 billion won has actually been executed, fueling controversy over possible fund misuse. The company explained, "The sequential quarterly disbursement schedule has not yet arrived," and "We plan to use the funds according to the usage plan depending on business conditions."
It added, "The decision was made to prevent risks in the semiconductor business from spreading to other business segments," and "Dawonsys's substantive influence over Dawon Powertron will remain intact."
Meanwhile, Dawonsys is facing a worst-case crisis in its core rail business. After President Lee Jae-myung said regarding the train delivery delay that "it seems a government agency was scammed," the stock price plunged 26% in a single day. The Ministry of Land, Infrastructure and Transport has asked the police to investigate Dawonsys on suspicion of contract violations in connection with delivery delays of ITX-Maum railcars ordered by the Korea Railroad Corporation (KORAIL).
According to NH Investment & Securities' Namu app, as of the day, the average purchase price for individual investors was 14,935 won, and the average return was minus (-)73.51%. The proportion of investors at a loss was 100%.