Spring, the peak season for the bicycle industry, has arrived, but homegrown bicycle corporations Samchuly Bicycle is not performing as strongly as hoped. While results have clearly recovered after COVID-19 and the rebound continues, governance risk stemming from Chairman Kim Seok-hwan of Samchuly Bicycle being indicted on embezzlement charges is adding to management uncertainty.
According to ChosunBiz reporting compiled on the 25th, Samchuly Bicycle saw trading in its shares halted after it was confirmed on the 12th on the previous month that Chairman Kim Seok-hwan had been indicted on charges of embezzlement totaling 1.3 billion won. The Korea Exchange (KRX) is scheduled to decide by the 26th of this month whether the company will be subject to a substantive review for listing eligibility. Depending on the decision, trading could resume and the subsequent procedures will diverge.
Kim was indicted on the 5th on the previous month on charges of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (embezzlement). The embezzlement amount was initially discussed as being in the 10 billion won range, but the amount stated in the indictment is currently 1.3 billion won.
Kim is the grandson of the late Chairman Kim Cheol-ho, founder of Kia. Samchuly Bicycle was spun off from Kia Industry in 1979. Kim has led the company since 1999. Kim's first trial is scheduled to be held at the Seoul Central District Court on Apr. 16.
Judging by Samchuly Bicycle's performance trend alone, the mood is not bad. Samchuly Bicycle posted sales of 175.5 billion won and operating profit of 12.1 billion won last year. Compared with the previous year, sales rose 8.9% and operating profit jumped 302.5%. It is a clear rebound from 2023, when sales were 106.7 billion won and there was an operating loss of 6.2 billion won. Profitability recovered thanks to an improved cost structure and expense efficiencies, which drove better results. Rising electric bicycle sales also helped.
This year, Samchuly Bicycle plans to target the spring peak season by unveiling a lineup of about 100 products spanning all age groups, including the electric bicycle brand "Phantom," the folding e-bike "Polaris," and children's bikes featuring the popular character "Princess Teenieping."
However, governance risk is weighing on this recovery trend. If the Korea Exchange (KRX) excludes Samchuly Bicycle from a substantive review on the 26th, stock transactions will resume immediately.
If it is designated for review, the Corporate Review Committee's main review will proceed while trading remains suspended. In this process, factors such as the size of the embezzlement, its impact on the company's finances, and plans to improve internal controls will be reviewed comprehensively. The review will conclude within 20 days with one of three outcomes: maintenance of listing, a period granted for improvement, or delisting.
A Samchuly Bicycle official said, "We are taking a cautious stance because the final result regarding Chairman Kim Seok-hwan's alleged embezzlement has not been confirmed."
Industry officials believe prolonged governance risk could damage both management stability and market trust.
A business community source said, "If governance risk becomes pronounced just as results are entering a recovery phase, it could act as a factor in discounting corporate value," adding, "The Korea Exchange (KRX) decision and the company's follow-up measures are key."