Samsung BioLogics Co under investigation for breach of accounting rule

Analysts opine that South Korea’s newly amended listing rule do not state that a positive net profit is a prerequisite; this could potentially shield the company from this line of investigation.

On Wednesday, shares of Samsung BioLogics Co Ltd fell by 20%, in what is their biggest intra-day fall, wiping out almost $6 billion in market capitalization after South Korea’s financial watchdog ruled that it had violated an accounting rule.

On Tuesday, South Korea’s Financial Supervisory Service (FSS) had given the Samsung Electronics affiliate and its auditors, measures they could adopt to mitigate concerns stemming from the provisional breach.

On Wednesday, in a regulatory filing Samsung BioLogics stated it would prove its books were sound.

In 2017 an activist group had raised the issue of whether Samsung BioLogics had breached accounting rules to inflate its net profit before its listing.

In 2015, Samsung BioLogics had reported a net profit of $1.77 billion (1.9 trillion won); in 2014 it had reported a net loss of 28 billion won while in 2013 it had reported a net loss of 62.4 billion won.

Having a positive net profit is not a prerequisite for listing since the Korea Exchange had instituted new rules which allows companies with growth potential to list despite posting a net loss, said Seo Keun-hee, an analyst at KB Securities.

($1 = 1,073.9000 won)

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