FADU is set to receive a determination from the Korea Exchange (KRX) on whether it will be subject to a substantive review of listing eligibility.
The KOSDAQ market headquarters of the Korea Exchange (KRX) said on the 19th that it "discovered that important matters for investor protection were falsely stated or omitted in documents FADU submitted regarding its listing review," and stated accordingly.
A substantive review of listing eligibility is a system in which the Korea Exchange (KRX) examines whether a listing should be maintained when serious issues arise in corporations' financial and management transparency. A decision is made within 15 trading days on whether to conduct a substantive review. If it becomes subject to review, the exchange deliberates and determines whether to delist.
This follows prosecutors indicting FADU and three members of management without detention on charges of violating the Financial Investment Services and Capital Markets Act. At the time of listing, FADU presented an annual revenue forecast of 120,294,000,000 won, but actual revenue came to 22,470,900,000 won. Prosecutors said management recognized that revenue could decline but still realized capital gains through a pre-IPO and proceeded with the listing, causing investor losses.
When media reports on this emerged, the Korea Exchange (KRX) suspended stock transaction in this corporations the previous day. It then went through procedures to confirm the indictment details with the Seoul Southern District Prosecutors' Office. The Korea Exchange (KRX) disclosed that "under Article 56, Paragraph 1, Item 2 of the KOSDAQ Market Listing Regulations, grounds have arisen for a substantive review of listing eligibility." Accordingly, the suspension period for trading of FADU's shares was changed to "until the decision date on whether it is subject to a substantive review of listing eligibility."
FADU said of the indictment that "this is not directly related to technological capability, the substance of the business, or the current revenue or financial condition," adding, "the core issue is a legal determination of the standards by which revenue estimates and business outlooks should be explained to investors at the time of listing under the technology exception program." It continued, "During the listing process, we explained our mid- to long-term business outlook based on the information available at the time and reasonable assumptions," and noted, "we plan to faithfully clarify the facts regarding the legal issues through future court proceedings."