Korea Zinc under scrutiny: Regulatory authority investigates potential misconduct

The South Korean financial regulator plans a thorough investigation into Korea Zinc's stock sale plan after indications of potentially unfair trading practices have emerged. The review will focus on the chronological sequence of events, including the sale plan and a recent buyback, as well as what information was known to the board and should have been disclosed, Hahm Yong-il, the agency's deputy governor, stated at a press conference. Since the announcement of the plan on Wednesday to issue 3.73 million new shares, which represents about 18% of the outstanding share capital, the company's stock price has fallen by 35%. With an estimated price of about 670,000 won per share, the sale could raise approximately $1.8 billion, which are primarily intended to be used for debt repayment. Just last week, the company completed a share buyback. These developments raise new questions about the independence of Korean corporate boards - a key aspect of the government's recent efforts to improve shareholder value and corporate governance. Korea Zinc may have withheld important information if the proceeds from the stock sale are, in fact, meant to cover debts incurred by the stock buyback, said Hahm. The urgency of the situation requires swift processing, he emphasized. Korea Zinc shares fell 7.7% to 998,000 won per share on Thursday. The agency plans further examinations into the dissemination of possible rumors, conflicting statements in official documents, the recording of transactions, and the use of potentially undisclosed information. Any attempt at artificial manipulation of stock prices will also be investigated. Korea Zinc declined to comment but stated that the stock sale is intended to reassure investors who fear a potential delisting, as the number of outstanding shares has significantly decreased due to takeover bids. To expand the shareholder base, the company will limit purchases to 3% of the offering. The company's shares have gained value since September, when the main investor, Young Poong, supported by private equity firm MBK Partners, attempted to gain control of the company through a takeover bid. The rival faction led by Choi, supported by Bain Capital, countered with the buyback offer, which was completed last week.