April 20, 2024

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[THE INVESTOR] Samsung Biologics, a contract manufacturer of biologic drugs under the Samsung Group, is facing persisting suspicions that it received preferential treatment in obtaining regulatory approval for a public listing on South Korea’s main stock market.

Despite strong refutation and explanations from Samsung Group’s de facto chief Lee Jae-yong, Samsung BioLogics and bourse operator Korea Exchange, the issue will once again become a hot topic of scrutiny at the next parliamentary hearing slated for Dec. 14.
 

Samsung BioLogics' production plant in Songdo, Incheon.

In November 2015, the KRX revised its listing rule that only companies which make at least 3 billion won ($2.56 million) in operating profit, can go public on the Kospi. Following this change, Samsung BioLogics, a company that remains in the red, made a strong Kospi debut last month.

This sequence of events had ignited suspicions that Samsung received business favors in exchange for donating 20.4 billion won to two foundations formed by President Park Geun-hye’s confidante Choi Soon-sil, the figure at the center of the country’s roiling political scandal.

The chairman of the Korea Exchange, Chung Chan-woo, is scheduled to appear as a witness at the upcoming hearing to answer questions over whether the KRX altered its listing requirements in order to help the Samsung subsidiary raise funds by going public.

Chung was summoned by Rep. Park Young-sun of the main opposition Democratic Party of Korea, who had interrogated Samsung Electronics Vice Chairman Lee Jae-yong on this issue during last week’s hearing.

“Samsung BioLogics is a company that has never made a profit. Its questionable public listing was made possible through preferential treatment,” Rep. Park said. “Has there ever been a case in which an unprofitable company has been listed in Korea?”

In response, the Samsung chief said that “no favors were involved,” adding, “from what I know, we actually tried to pursue a public listing abroad, but the KRX actually came to us first.”

Earlier this month, Samsung BioLogics had denied all alleged links to the Choi Soon-sil scandal or any dubious state-business ties in a public announcement on its website.

“Samsung BioLogics completed all of listing procedures in accordance with established rules and principle,” the firm said.

“Although we initially considered a Nasdaq listing, we picked the Kospi as our final IPO venue in consideration of persistent persuasion by the Korea Exchange, the revised listing regulations as well as public expectations,” Samsung BioLogics said.

It also cited examples of other biopharmaceutical companies, which were in the red at the time of their IPO, such as the Nasdaq-listed Tesla and Kosdaq-listed Kangstem Biotech and Legochem Biosciences.

The KRX also stated that the bourse operator actively persuaded Samsung BioLogics to go public on the Kospi, instead of the Nasdaq, as part of its standard efforts to boost domestic investment.

“We decided to revise our listing requirement in November last year in order to recognize the diverse achievements of promising companies with high-growth potential,” the KRX said, pointing to more flexible listing requirements devised by foreign stock markets.

Despite the company’s explanation, shares of Samsung BioLogics have been continuously falling over the past few weeks, partly due to the recent political suspicions as well as massive short-selling by foreign investors last week.

Samsung BioLogics shares stood at 145,000 won as of last Friday, losing more than 10.22 percent from a closing price of 161,500 won on Nov. 28, the day that local reports alleging the company’s ties to the Choi scandal broke out.

By Sohn Ji-young/The Korea Herald (jys@heraldcorp.com)