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| Shin Poong Pharmaceutical CEO Yoo Je-man |
Shin Poong Pharmaceutical shares are expected to tank further, crippled by a police investigation into allegations of embezzlement and misappropriation by its management, compounded further by its highly probable delisting from Morgan Stanley Capital International (MSCI) equity index scheduled for Thursday, according to market watchers Tuesday.
Few believe the once-skyrocketing share price would recover to a record-high of 214,000 won ($178) as seen in September 2020, when it was lifted by the development of Pyramax. But the COVID-19 treatment drug ended up a failure in its phase 2 trial.
Dimming its price recovery prospect further is its delisting from MSCI's equity index, almost considered a given among local brokerages, some of which expect an investment fund outflow of about 40 billion won upon the grim news.
Corruption probe
The police are expected to widen their investigation into the firm over the suspected embezzlement and misappropriation of about 25 billion won, after a local media outlet reported that the figure will amount to around 35 billion won, as mentioned in a letter written to a Shin Poong executive from a supplier.
According to the report, the supplier whose identity was withheld demanded the pharmaceutical firm pay him 3 billion won for the financial losses incurred in the process of helping create a slush fund, mostly by inflating raw material costs.
Further amplifying investor anxiety are the suspension of its share trading and its possible delisting from the KOSPI to be reviewed by stock trading authorities, upon indictment of the firm executives.
Equally troubling is a report by NH Securities which said the firm is almost certain to be delisted from the MSCI equity index, as illustrated by the shares market cap staying below the "lower buffer" of the overall cutoff range of between 2.6 trillion won and 3 trillion won.
Shin Poong's market cap stood at 1.29 trillion won, Tuesday, the lowest among Korean firms on the index list.
"Shin Poong is all but confirmed to be excluded from the list, leading to an investment fund outflow of around 39.3 billion won," the securities firm's report said.
The share price of the firm hovered at 24,400 won, Tuesday, hitting a series of new 52-week lows every couple of days for the past 16 months.
According to the Korea Exchange, Shin Poong's price fell 74.23 percent last year, the second-sharpest drop registered by KOSPI-listed firms.
The price was under 7,000 won up until February 2020, but it nearly quadrupled to 25,000 won two months later, shortly after the start of the COVID-19 pandemic.
It then skyrocketed to over 214,000 won, a 32-fold increase in just seven months, before plunging to 67,000 won, July 6, upon the firm's disclosure that Pyramax failed to show a statistically significant effect.
