It turned out that five KOSDAQ-listed companies related to Genencell have been delisted or are facing delisting. KH Felix has already been delisted, and three companies—Sejong Medical, KBIO LABS, and Hyundai Feed—stand at a crossroads of delisting. Among the listed companies entangled with Genencell, the only survivor, KOREA PHARMA(032300), once saw its share price top 90,000 won in 2021, but it has now plunged to 7,000–8,000 won.
While people related to these listed companies pocketed huge illicit gains on the Genencell theme, the damage fell squarely on as many as 200,000 small shareholders. The pattern repeated in which forces that had preassembled company equity spread favorable information related to Genencell, sold their equity at high prices as shares rose, and then individual investors bore the brunt of the subsequent crash.
Small shareholders of listed companies related to Genencell number from at least about 10,000 to as many as about 70,000. Small shareholders hold more than half of these companies' shares. The total number of small shareholders across the five listed companies (KH Felix as of the end of Dec. 2024) is close to 200,000.
According to a recording released by independent lawmaker Han Dong-hoon, the date when candidate Kim asked the Ministery of Food and Drug Safety chief, at the request of an acquaintance named Yang, a broker, to quickly approve Genencell's clinical trial plan was Oct. 12, 2021. But the Genencell theme had already been sweeping the KOSDAQ market since 2020, a year before suspicions of Kim's influence-peddling emerged.
In 2020, when COVID-19 was raging, Genencell, founded by a Kyunghee University professor surnamed Kang, announced a plan to develop a COVID-19 treatment with KOSDAQ-listed KOREA PHARMA and GoldPacific (now KBIO LABS). Kyunghee University and the listed companies formed an industry–academia cooperation group, giving the venture a respectable facade.
As the government poured massive budgets into securing vaccines and developing treatments, investors' attention focused when Genencell stepped forward to develop a COVID-19 treatment. On news that clinical trials would take place in India, the stocks of KOREA PHARMA and GoldPacific, which were collaborating with Genencell, jumped two to three times.
GoldPacific's largest shareholder is another KOSDAQ-listed company, MiraeING(007120), and at the time riding the Genencell theme, it received investment funds not only from MiraeING but also from Fantagio.
It was also in 2020 that KH Felix released a rights offering to existing shareholders to invest in Genencell's new drug development. In Aug. 2020, KH Felix released a shareholder-allotted paid-in capital increase worth 129 billion won, but only submitted a securities registration statement in Mar. 2021 after the Financial Supervisory Service imposed eight correction orders.
At the time, KH Felix said through the securities registration statement that it invested 1.5 billion won in Genencell in Nov. 2020. It also offered a rosy outlook that if it succeeded in developing treatments based on natural substances, including for COVID-19 and shingles, Genencell's sales would increase to 85 billion won in four years.
As KH Felix climbed aboard the Genencell theme, its share price also swung sharply. From late 2020 to early 2021, whenever news related to Genencell's clinical trials emerged, KH Felix shares rose to the daily limit and then plunged, a pattern that repeated.
But KH Felix was later delisted, and GoldPacific, which had sunk to a "penny stock," moved to consolidate shares to escape the delisting crisis.
Even after Professor Kang later transferred management control to Sejong Medical, the Genencell theme frenzy continued. Sejong Medical acquired management control of Genencell for 11.3 billion won in Oct. 2021.
At that time, Sejong Medical's largest shareholders were not the founders but a new technology business investment partnership and an investment company, Time Investment. Right after Sejong Medical acquired Genencell, the Ministery of Food and Drug Safety approved the clinical plan, and Sejong Medical's share price skyrocketed.
Sejong Medical's largest shareholders sold large amounts of equity and moved to exit. Authorities regulate that when an investment partnership of unclear identity becomes the largest shareholder, it cannot sell equity for one year (lock-up). But Sejong Medical's largest shareholders were not a private partnership with no clear legal entity, but a new technology venture capital firm and an investment company established under law, so they were not subject to the lock-up rule.
In the end, the damage fell squarely on individuals who bought the stock. Sejong Medical's share price, initially around 3,000 won, surged after the largest shareholder changed in 2020, and that year, on news that it acquired Genencell and that Genencell had applied for a COVID treatment patent, the share price spiked to 8,000 won.
But the surge did not last long. As the major shareholder sold equity, the Genencell issue no longer lifted the stock, and in Mar. 2024, with the price having plunged to around 300 won, trading was halted. Sejong Medical was delisted in June.
Even after that, the "fireworks" of listed companies exploiting Genencell's thematic appeal continued. Sejong Medical's current largest shareholder is Canary BioM (now BSJ Holdings), the parent of Canary Bio (now Hyundai Feed), which received a delisting decision from the Korea Exchange (KRX). After acquiring Sejong Medical, BSJ Holdings used company funds to buy 50 billion won worth of Hyundai Feed equity.