[At the Crossroads] Syntekabio ① CEO Jeong Jongseon Took Company Funds Right After Receiving Shareholder Investments

6 Billion Won in Loans to CEO Jeong Jongseon and Executives... Disclaimer of Opinion on Semiannual Report
Designated as Issue Alert Item Just 7 Months After 24.3 Billion Won Rights Offering

KOSDAQ-listed company Syntekabio received a "disclaimer of opinion" from its audit firm on its semiannual report. The firm was criticized for failing to verify the legitimacy of loans it had extended to CEO Jeong Jongseon of Syntekabio and other executives. As Syntekabio received investment from general shareholders through a paid-in capital increase just seven months ago, controversy is expected.

According to the Financial Supervisory Service’s Electronic Disclosure System on August 19, Syntekabio disclosed that it had received a disclaimer of opinion from Samjong KPMG, its audit firm, on the review (audit) of the report for the first half of this year. As a result, Syntekabio was designated as an issue alert item for investors. If the grounds for the disclaimer of opinion are not resolved by the end of this year, the company will proceed to the delisting process.

The reason for the disclaimer is due to loans provided to Jeong Jongseon, the largest shareholder and CEO of Syntekabio, Director Hong Jonghee, and Director Jeong Jongcheol. Syntekabio lent 300 million won to CEO Jeong, 200 million won to Director Hong, and 100 million won to Director Jeong under the pretext of welfare, amounting to a total of 600 million won.

The audit firm stated, "We were unable to obtain sufficient and appropriate review evidence to verify the legitimacy of the loan transaction, the establishment of the company's lending policy and board approval, as well as the implementation of internal procedures and related controls, and the actual purpose for which the funds lent were used."

Lending funds to the largest shareholder or related parties by a listed company may violate the "Prohibition of Credit Extension by Listed Corporations" under commercial law. Therefore, the company must present legitimate procedures and reasonable grounds for the loans to the auditor. In fact, several listed companies have faced criminal penalties related to such issues.

According to the semiannual report, CEO Jeong and others borrowed funds from the company in the second quarter of this year. Details such as interest rates or collateral arrangements were not disclosed. However, if the uncollected income is presumed to be interest, it can be inferred that an annual interest rate of about 0.25 to 0.4 percent was applied. Under tax law, the interest rate for loans to related parties should be 4.6 percent.

This lack of transparency led Syntekabio to receive a disclaimer of opinion, resulting in confusion among shareholders. The stock price plummeted after the company was designated as an issue alert item. On the previous day, Syntekabio shares plunged by 24.45 percent to close at 1,131 won.

The controversy is expected to intensify, particularly because Syntekabio recently carried out a rights offering. In December last year, Syntekabio conducted a shareholder-allotted paid-in capital increase, raising 24.3 billion won. At that time, 98.87 percent of existing shareholders subscribed, exhibiting confidence in the company. The issue price for the new shares was 2,700 won per share. As a result, those who participated in the capital increase are now facing a 58 percent loss as of the previous day's close.

In response, Syntekabio stated through a press release, "The grounds for the disclaimer of opinion are not related to the company’s business operations or actual commercial viability, but are issues due to scope limitations regarding procedures and supporting documentation." The company added, "We plan to immediately form a team of legal and accounting experts to conduct forensic procedures, undergo a re-audit, and carry out supplementary measures to restore market confidence."

This content was produced with the assistance of AI translation services.