ECOPRO founder and ECOPRO BM Chairman Lee Dong-che

By Lee Kyung-min

Minority and private equity fund (PEF) investors are expected to bear the full brunt of the plummeting share price of ECOPRO BM, a local cathode material supplier with the second-largest Kosdaq market capitalization of over 7.3 trillion won ($6 billion), according to industry watchers, Tuesday.

Overseas investors dumped 119 billion won worth of the firm's shares in the first five trading days of this month, spooked by the prosecution's investigation into five of its executives including its chairman Lee Dong-che on suspicion of insider trading.

The massive selloff by overseas investors followed the unusually swift referral to the prosecution by the Financial Services Commission-led probe, part of which reportedly identified evidence destruction attempts.

Also joining the selling spree were institutional investors including pension funds and asset management funds, which net-sold a combined 14.6 billion won in the same period, in contrast to PEFs which net-purchased 17.6 billion won. Individual retail investors net-purchased 111.6 billion won in that period.

Shares of ECOPRO BM plunged on Tuesday to about 322,000 won, down by 20 percent from the price on Jan. 26, impacted by the prosecution investigation. Its parent firm ECOPRO saw a similar drop of over 20 percent to 68,200 won in the same period.

PEFs concerned

SKS Private Equity, Korea Investment Private Equity, IMM Investment and K&T Partners are among the major PEFs that invested in the convertible bonds to the amount of 150 billion won issued by ECOPRO last July.

The share price of ECOPRO following the issuance of the convertible bonds rose over 150,000 won last November, alongside ECOPRO BM which soared to 570,000 won.

The prices of the two fell about 5 percent on Jan. 21 when ECOPRO BM's factory in Cheongju, North Chungcheong Province, halted production due to a fire.

The shares took a dive a week later, when the insider trading allegations made headlines, and have since been on a downtrend.

Minority ECOPRO BM shareholders are demanding Lee's resignation, as part of efforts to dispel shareholders' concerns over further price drops.

"A qualified CEO should be appointed to enhance transparency in corporate governance," a shareholder said in an online community.

Similar calls are expected from institutional investors, mostly state-run investors and private asset management firms entrusted with taxpayers' money as part of a long-term policy financing scheme to promote competitiveness of domestic parts, materials and equipment manufacturers.

Opinions are divided as to whether ECOPRO BM and ECOPRO share prices would bounce back.

Some say their robust financials will end up lifting the prices in the end, whereas others say the criminal trials and convictions of top executives will dim the corporate outlook sending share prices lower.