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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] The Financial Supervisory Service (FSS) has referred allegations of unfair trade involving a rights offering by Korea Zinc's management, led by Chairman Choi Yoon-beom, to prosecutors as a fast-track case amid the company's ongoing management dispute.
According to the financial investment and legal sectors on Tuesday, the FSS Capital Market Special Judicial Police (Special Judicial Police) determined that Korea Zinc's management and board violated the Capital Markets Act when they decided on a shareholder-allocated rights offering worth KRW 2.5 trillion on October 31, 2023. The offering involved issuing new shares at a 30% discount from the prior day's market price, causing Korea Zinc's stock to hit its lower limit on the day of the announcement.
The management had earlier announced plans to defend against a management control challenge from the MBK Partners-Young Poong consortium by conducting a share buyback. From October 4 to 23, they committed to purchasing 2,331,302 shares of Korea Zinc at KRW 830,000 per share through a public tender offer. However, during the public tender offer period (October 14–29), they were revealed to have conducted due diligence with Mirae Asset Securities to prepare for the massive rights offering.
Further controversy arose when Chairman Choi's team stated in the tender offer filing that there were "no plans for future changes to the financial structure," despite ongoing discussions about the rights offering.
The FSS deemed this a potential violation of the Capital Markets Act and requested the management to submit a revised disclosure. In a press briefing, FSS Deputy Governor Ham Yong-il emphasized, “If the management knowingly disclosed 'no significant financial changes' in the tender offer filing despite being aware of the planned rights offering, it constitutes a false disclosure and unfair trade. If proven, the securities firm involved may also face charges of aiding and abetting.”
Though Korea Zinc eventually withdrew the rights offering plan in November, just two weeks after its announcement, the FSS concluded that the false disclosures and unfair trade allegations fall under Article 178 of the Capital Markets Act, prompting the agency to launch an investigation.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
