South Korea’s financial market watchdog is conducting an investigation into Korea Zinc’s decision to issue new shares, amid concerns of potential unfair practices. Here are the key points:
Share Issuance Announcement: Korea Zinc, the world’s largest zinc refiner, announced plans to issue new shares valued at approximately $1.8 billion, which analysts view as a strategy to deter a takeover attempt by Young Poong and MBK Partners. Following the announcement, Korea Zinc’s stock prices experienced a significant decline.
Recent Share Buyback: Just two days prior to the share issuance announcement, Korea Zinc had repurchased shares at a higher price and committed to canceling them to enhance shareholder value, raising questions about the timing and transparency of the new share issuance.
Regulatory Investigation: The Financial Supervisory Service (FSS) is investigating whether Korea Zinc deliberately omitted information about the new share issuance during its tender offer for share buybacks. Mirae Asset Securities, which facilitated both the share issuance and the tender offer, is also under scrutiny.
Potential Consequences: If any misconduct or unfair trading practices are discovered, the FSS indicated that it could lead to a criminal investigation. Senior deputy governor Hahm Yong-il emphasized the importance of corporate governance and accountability in this matter.
Ongoing Corporate Conflict: Korea Zinc, managed by the Choi family, is embroiled in a power struggle with the co-founding Chang family, who are affiliated with Young Poong. This conflict intensified when the Changs, in collaboration with MBK Partners, made a joint offer in September.
Additional Investigations: The FSS is also looking into allegations of accounting fraud at Korea Zinc and will soon decide on whether to initiate a formal investigation.