Institutions cut off Osstem Implant in funds while authorities move to audit

[Photo by Yonhap]

South Korean financial authorities are studying the scandal with Osstem Implant Co. while banks and securities firms are suspending sales of funds that package the top dental implants maker, sparking concerns for broader damage for investors on top of shareholders in the Kospi-trading company with delisting possibility.

Woori Bank on Friday said it will stop selling Dongbu Bio-Health Care Securities Investment Trust 1 - Equity Fund and four other funds that have invested in Osstem Implant. Previously on Wednesday, Hana Bank notified its customers of halting sale of 77 funds for holding Osstem Implant shares in portfolio. NH Nonghyup Bank also has stopped selling related 19 funds.

Banks lent the dental implant maker combined 302.6 billion won ($252 million) last year, according to the Financial Supervisory Service. Of this, loans dated less than one year amount to 108.6 billion won, and longer-dated loans 94 billion won.

Securities firms are also quickly cutting off from Osstem Implant. Daishin Securities have announced it will stop buying additional Osstem Implant shares for its 63 funds, while warning of price drop as contained Osstem Implant’s shares were priced as of December 31, 2021.

Mirae Asset Securities, which has 106 funds containing Osstem Implant shares, plans to take action after the stock exchange operator’s review comes out. Mirae Asset TIGER Health Care ETF has 7.7 percent of its assets invested in Osstem Implant, thus any arbitrary removal of a stock could result in changes to the fund yields.

Osstem Implant is currently under investigation by both police and financial regulatory authority, for an employee’s embezzlement of 188 billion won, which equals to 91.81 percent of the company’s equity capital.

The Korea Exchange have been suspending the trade of Osstem Implant shares since Monday and will begin another review whether to kick out the stock upon discovering major corporate fault.

The suspected Osstem Implant employee, identified only by surname Lee is currently under police investigation. The Financial Supervisory Service also has launched its own probe for possible violation in fair trade regulations, such as stock price manipulation and illegal use of inside information.

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