The number of false public disclosures hit an all-time high in the Korean stock market this year. Amid the prolonged economic slump, financing plans were aborted and supply contracts were canceled. This led to an increase in the number of companies designated as unfaithful disclosure companies.
The number of KOSPI- and KOSDAQ-listed companies designated as unfaithful disclosure corporations reached 114 this year, already exceeding 112 for the whole of last year. The number of false disclosures increased steadily from 78 in 2015. Last year’s figure was a record high.
In particular, there is an increase in the number of companies which became unfaithful disclosure companies while reversing plans for paid-in capital increases or the issuance of convertible bonds. The number of companies designed as unfaithful disclosure companies by withdrawing paid-in capital increase plans has more than doubled from seven last year to 15 this year. The number of companies caught for disclosure changes increased from seven last year to 15. These companies made big changes in their public disclosures on the amounts of CBs and paid-in capital increases in their original public disclosures.
Such results came from an increase in capital-less M&As and unfair trade in the stock market, some stock market watchers say. The number of cases where listed companies cancelled or changed their supply contract disclosures has increased from four in 2017 to nine in 2019.
Korea Exchange designates a listed company as an unfaithful disclosure company when it does not disclose major investment matters such as financing, a change in its largest shareholder, and the conclusion of a contract. Unfaithful disclosures are divided into three kinds: “disclosure failures” which refer to failures to disclose obligatory matters in a certain period or to make a false public disclosure; “disclosure reversals” which refer to reversing publicly disclosed matters such as paid-in capital increases, contract signing, and the acquisition of stocks; and “disclosure changes” which revise the already disclosed amounts of new financing and newly acquired assets.