Semiconductor fabless corporations FADU secured a new order worth 20.3 billion won, the largest since its founding. But because stock trading was suspended after it was engulfed in a "revenue inflation" controversy at the time of its listing, the latest order has not been reflected in the share price at all.
Shareholders say that because they invested with the understanding that FADU is a technology-special listing corporations, resuming transactions should take precedence over excessive protection by authorities. Experts, however, note that a cautious approach, including a substantive review of listing eligibility, should come first to prevent harm not only to current shareholders but also to potential investors.
According to the financial investment industry on the 15th, FADU on the 13th signed a new consignment production contract worth 20.3 billion won with an overseas NAND flash memory manufacturer. The company said that on a standalone basis it is the largest since its establishment. The recent explosive growth of the enterprise SSD (eSSD) market driven by expanded investment in artificial intelligence (AI) data centers has translated into tangible orders for FADU, according to assessments.
Despite the "biggest-ever positive catalyst," shareholders are glum. FADU's shares are currently under a trading halt. Coincidentally, on the 13th when FADU released the order news, the Korea Exchange (KRX) Corporate Review Committee discussed whether FADU should be subject to a substantive review of listing eligibility and whether to resume transactions, but failed to reach a conclusion.
The exchange disclosed that it would extend the investigation period by 15 business days until Feb. 3, citing the need for additional review. In response, shareholders are criticizing that "the trading halt in the name of investor protection is instead amplifying investor damage."
FADU, which entered KOSDAQ in Aug. 2023 through a technology-special listing, presented an annual revenue outlook of 120.294 billion won at the time, but actual revenue came to 22.4709 billion won, sparking a "revenue inflation" controversy. Prosecutors judged that management pushed ahead with the listing despite recognizing the possibility of a sharp revenue drop and reaped capital gains, and indicted them on charges of violating the Financial Investment Services and Capital Markets Act. Based on this, the exchange has suspended trading of FADU shares since Dec. 19 last year.
◇ Minority shareholders' alliance: "Resuming transactions takes priority over shareholder protection"
Shareholders are urging the Korea Exchange (KRX) to resume transactions, noting that they invested knowing FADU is a technology-special listing corporations and emphasizing FADU's industrial value.
The FADU minority shareholders' alliance issued a statement on the 14th saying, "Most shareholders invested knowing that FADU is a technology-special listed company, and invested not for immediate revenue but for future technological prowess," and added, "Rather than the exchange heightening uncertainty by delaying its review, we hope it will make the decision of 'resuming transactions' so the corporations can focus on its core business and strengthen global competitiveness."
The minority shareholders' alliance also cited the precedent of Samsung Biologics, which resumed trading in 19 days at the time of its listing despite an accounting fraud controversy, citing industrial value and investor protection, and emphasized, "FADU likewise possesses competitive technology in the AI Semiconductor market, so we expect a forward-looking judgment based on the same criteria."
◇ Experts: "We understand current shareholders, but protecting future shareholders comes first"
Experts say they understand the urgent position of existing shareholders, but that the focus should be on long-term market trust and protecting the rights and interests of "future shareholders." An accountant who previously served on the Corporate Review Committee said, "The Corporate Review Committee prioritizes protecting future shareholders over the interests of existing shareholders," adding, "It is not possible to decide on resuming transactions based solely on favorable company news; it is only possible when finances, governance and more are comprehensively verified."
The person added, "If existing shareholders take the opportunity to dispose of shares and realize profits, that burden can be passed directly on to future shareholders," and said, "If existing shareholders entered knowing the company's circumstances, it is appropriate to share responsibility for the trading halt rather than demand resumption of transactions."
Kim U-jin, a professor in the Department of Business Administration at Seoul National University, also said, "The exchange has a duty to protect not only current shareholders but also potential shareholders," and explained, "If current shareholders sell and exit upon a resumption of transactions, it is desirable to make a decision after sufficient consideration in the substantive review, because potential shareholders' potential losses must also be considered."
The FADU case is prompting fundamental questions about the technology-special listing system itself. Many corporations listed through the special technology route have fallen far short of the performance estimates presented at the time of their initial public offering (IPO), raising criticism that investors are not receiving sufficient and accurate information. In fact, only 6 out of 100 KOSDAQ technology-special listed companies have met their performance estimates.
Yoo Hyo-sang, head of the Unicorn Management and Economy Research Institute, said, "Evaluating technology is inherently an area where strategic investors (SI) have strengths, and the structure that allows individual investors, whose understanding of technology is relatively low, to directly approach technology corporations carries significant risk," and argued, "Technology corporations need to shift from technology-special listings to methods such as technology transfer or receiving investment from big tech."
A Korea Exchange (KRX) official said, "We are conducting a comprehensive review considering financial stability and management transparency," and noted, "It is difficult to state a particular position at this time because the review is ongoing."