Lunit's founder and largest shareholder, Chairman Baek Seung-wook, holds a press conference to celebrate the 10th anniversary on Aug. 24, 2023, at the headquarters near Gangnam Station in Seoul. /Courtesy of ChosunBiz

It has been confirmed that U.S. Guardant Health, the second largest shareholder and strategic investor of medical artificial intelligence (AI) company Lunit, sold all its equity in Lunit at the end of last year. Lunit stated that it was unaware of the sale by Guardant Health.

According to Guardant Health on the 31st, the company sold approximately $34 million (about 49.3 billion won) worth of Lunit shares at the end of last year. However, it did not disclose the specific method of sale or the purchasing institution. The largest shareholder of Guardant Health is Vanguard Group.

An industry insider noted, "Considering the equity that Guardant Health held in Lunit and the amount of this transaction, it is essentially a complete sale of its shares."

In August of last year, Guardant Health also disposed of approximately 400,000 shares of Lunit via a block deal (off-hours bulk trading). At that time, the equity percentage decreased from 5.44% to 3.99%. The institution that purchased the 400,000 shares was U.S. asset management firm Brookdale Asset Management.

A Lunit official stated, "The company was also unaware of Guardant Health's sale of the shares," and added, "Previously, as Guardant Health's equity percentage dropped below 5%, the obligation to disclose equity changes was eliminated, so there were no separate disclosures for the additional sales."

Lunit and Guardant Health also collaborated to launch the AI pathology analysis product "Guardant360 TissueNext" into the market.

Regarding the background of Guardant Health's stock sale, Lunit explained that it was "a reallocation of resources for the sustainable growth of its core business and a restructuring of Guardant Health's own investment portfolio after being a long-term investor in Lunit for more than three years." He also said, "The two companies maintain their existing business collaboration regardless of the equity sale, and the ongoing cooperation projects are proceeding as normal."

However, there are interpretations suggesting that Guardant Health's complete disposal of Lunit shares may be related to the block deal involving Lunit executives at the end of last year.

Seven individuals, including six Lunit executives and one major shareholder, sold some of their shares via a block deal before the market opened on December 18. A total of 380,334 shares were sold, purchased by a U.S.-based long fund management company. According to the disclosure made by Lunit at that time, Executive Director Park Hyun-sung, Director Lee Jeong-in, Executive Director Park Seung-kyun, Executive Director Yoo Dong-keun, and Executive Director Paeng Gyeong-hyun each sold 64,156 common shares at 77,934 won. The individual sale amount totals 4,999,993,704 won.

Consequently, there are suspicions in the stock market that they engaged in "trickery" to avoid the pre-disclosure system for insider trading that has been in effect since July of last year. This is because they sold just below the threshold amount of "5 billion won" that triggers the obligation to disclose.

This system was established to prevent drastic drops in stock prices due to mass sales by company insiders, which can harm investors. Major shareholders owning 10% or more, company management, and strategic investors must disclose the transaction price, quantity, and period at least 30 days in advance when trading 1% or more or 5 billion won or more.

At that time, a Lunit official explained, "This was due to personal reasons such as loan repayment as executives and related parties actively participated in the company's large-scale funding plan," and added, "It has nothing to do with the company's growth potential." On the same day, Lunit also announced that Chairman Baek Seung-wook and CEO Seo Beom-seok purchased a total of 7747 company shares worth 600 million won.