Private investors hit hard by the hijacking of Osstem Implant

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Retail investors have fallen victim to the latest embezzlement case involving Osstem Implant, Korea’s largest dental implant maker.

One of the company’s employees, a 45-year-old man who was in charge of managing the company’s funds, admitted to embezzling 188 billion won ($ 158 million) from the company, which led to the indefinite suspension of Osstem shares on the Kosdaq Market since January 3.

The Korea Stock Exchange (KRX) will decide by Jan. 24 whether it needs an eligibility review to lift the Osstem suspension.

Although the prime suspect has been arrested, it is still unclear whether this will have any impact on the company’s suspension.

“It is true that the arrest by the police will make it easier for the company to recover the embezzled money,” said a KRX spokesperson, “but KRX’s decision will be made on the basis of a review comprehensive covering a range of factors such as management transparency and the context of embezzlement.

Even if it reappears in the market, its stock price is likely to drop.

The embezzled money represents 91.8% of the company’s equity, or 205 billion won. It is possible that any unrecovered amount will be recognized as a non-operating loss.

According to Korea Securities Depository, 19,856 minority shareholders of Osstem Implant hold 55.57% of the shares.

Osstem Implant was the 19th largest company listed on Kosdaq before its listing was suspended, with a market capitalization of 2.39 trillion won.

Adding insult to injury, Mirae Asset Securities announced on Tuesday that Osstem Implant shares no longer hold any collateral value, meaning loans backed by Osstem shares can no longer be extended. Other institutional lenders, including Kyobo Securities, Hana Financial Investment and Meritz Securities, have followed suit.

Investors who obtained loans secured by Osstem shares must now repay the remaining debt.

“Although the lenders will not be able to sell the guaranteed shares if Osstem remains suspended from its activities until maturity, the borrowers will be charged interest on late payment if they do not repay the debt”, explained a industry insider working in a brokerage firm.

According to the Korea Financial Investments Association, brokerage firms may restrict margin trading or lower the credit limit in the event of an event that could seriously affect the business of the business.

Investors in exchange-traded funds (ETFs) will also be affected, as ETFs with Osstem Implant may suffer a downturn as well.

Osstem Implant shares accounted for 7.19% of Mirae Asset Global Investments’ Tiger Healthcare Equip ETF on Wednesday, 3.88% of Kosdaq 150 Biotech ETF, with the total investment amounting to some 20.2 billion won.

Hana Bank said on Wednesday it was halting ETF sales with Osstem Implant, followed by other brokerage firms including Mirae Asset Securities and Daishin Securities.

Some minority shareholders are said to be considering filing a class action lawsuit against Osstem Implant.

On January 6, the law firm Hannuri Law placed a banner on its website urging minority shareholders of Osstem Implant to participate in the class action lawsuit against the company.

“Even if Osstem Implant recovers the embezzled money, the damage to minority shareholders cannot be easily repaired,” Hannuri Law said, arguing that shareholders can file a claim for compensation or bring derivative legal action against the company.

BY LEE TAE-YUN[[email protected]]


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