The decision on whether Kukil Paper will be delisted will be made within 20 days. It has been two years since the controversy surrounding the owner's son, Choi Woo-sik, was raised.
If the Korea Exchange grants an improvement period, the delisting will be postponed again, and if it decides that delisting is applicable, the delisting process will commence on the 23rd.
According to the Financial Supervisory Service's electronic disclosure system on the 6th, Kukil Paper's delisting status will be determined by June 23. This follows the granting of a one-year improvement period after the decision to delist due to 'comprehensive conditions' on May 29 last year.
◇ Kukil Paper, which was expanding its business by entering the 'graphene' market... the largest shareholder suddenly dumped shares in bulk
Kukil Paper produces industrial and specialty papers such as cigarette wrapping paper. Founded in 1978, it was listed on the KOSDAQ in 2004. In 2018, it established 'Kukil Graphene' to develop and produce graphene as part of its diversification strategy. At that time, news of collaboration with Google on graphene led to its stock price soaring up to eightfold.
Kukil Paper, which was expanding its business, suddenly delivered bad news to the market in March 2023. First, disappointing performance was reported. Kukil Paper announced that its operating loss for 2022 is expected to reach 11.1 billion won, a 79% increase from 6.2 billion won last year. The net loss for the period also increased by 74%, reaching 14.3 billion won.
In a precarious business environment, the maximum shareholder, CEO Choi Woo-sik, exacerbated the market turmoil by entering into a stock transfer agreement with the sports equipment wholesaler 'DK ONE'. Choi decided to transfer 31.885 million shares (24.98%) out of the 41 million shares (32.13%) he held to DK ONE for a total of 35.6 billion won.
Two days later, Choi sold 7.455 million shares out of the remaining 9.115 million shares on the market. Additionally, Lee Kyung-beom, president of Plus Currency, sold 6.115 million shares on the market, resulting in a large volume of shares being sold in the stock market. Due to massive sell-offs, the share price plummeted from 1,967 won on the 6th to 937 won on the 10th, a decline of 52%.
◇ 'Trading halted' following application for corporate rehabilitation... then a decision for 'delisting'
Kukil Paper applied for 'rehabilitation proceedings' on March 13 last year after failing to pay 23 billion won in corporate bond principal and interest. Earlier, Kukil Paper issued convertible bonds totaling 20.5 billion won in the 7th and 8th rounds, but applied for rehabilitation due to a lack of funds for debt repayment, which also led to a halt in stock transactions.
At this time, Choi was also accused of attempting to avoid losses using 'undisclosed information' by selling a large amount of stock just before submitting the application for the initiation of rehabilitation proceedings, leading to his indictment.
Kukil Paper received a decision for 'delisting' following a trading halt. The Korean Accounting Firm stated in its 2022 business report that 'the continuation of the company is uncertain' and rejected the audit opinion. Kukil Paper recorded an operating loss of 11 billion won and a net loss of 14.5 billion won in 2022, determining that the company would not be able to continue operating as its current liabilities exceed its current assets by 12.6 billion won.
However, Kukil Paper filed an objection to the delisting and was granted an improvement period until April 2024. If the audit opinion in the 'audit report' changes to appropriate within that period, the grounds for delisting will be resolved.
◇ Just avoided delisting, but now under substantial review for 'breach of trust'
Meanwhile, Kukil Paper experienced several changes in its largest shareholder while undergoing rehabilitation proceedings, welcoming its new acquirer, Samramidaes. As a result, it was designated again for substantial review of listing eligibility on February 22, 2024.
On January 15, 2024, Samramidaes acquired 1.05 billion shares of Kukil Paper, becoming the largest shareholder with an equity stake of 89.14%. Previously, Choi Woo-sik temporarily became the largest shareholder through a conversion of shares, and during the second reduction of capital, Company J became the largest shareholder, before Samramidaes ultimately took over as the final largest shareholder through a third-party allocation of paid-in capital after the rehabilitation plan was approved.
On May 3, 2024, the occurrence of 'embezzlement and breach of trust' was disclosed, adding to the grounds for substantial review of listing eligibility. Kukil Paper filed a lawsuit against former CEO Choi and two others for breach of trust amounting to 2.24 billion won.
Subsequently, Kukil Paper was granted a 12-month improvement period. However, as this period expires, the Korea Exchange's Corporate Review Committee is set to decide on the 23rd regarding the delisting or the provision of an additional improvement period.
◇ Experts say delisting is unlikely due to the damage caused to small shareholders
Experts noted that despite ongoing discussions on delisting, actual delisting is expected to be difficult.
Yoo Ho-sang, head of the Unicorn Management and Economic Research Institute, stated, 'If the delisting factor arises from the fault of the major shareholder, there is an awareness that small shareholders suffer.' He added, 'Furthermore, for the exchange, having more managed stocks actually benefits the structure, so even if the delisting requirements are met, there is little incentive to enforce it.'
However, he added, 'It's not necessarily the case that small shareholders will suffer because delisting occurs.' Yoo explained, 'Investing is inherently a risky endeavor, and while delisting means liquidity drops sharply, it does not mean that the stock itself disappears or that off-market trading becomes impossible, so small shareholders still bear some responsibility.'