EcoPro BM Co., South Korea’s top cathode material producer, is under probe by local prosecutors for allegations of insider trading, according to sources from financial regulators.
Key executives including Lee Dong-che, the founder and chairman of EcoPro Co., the holding company of EcoPro BM, were known to be booked as suspects. If they are found guilty, the company may have trouble winning new orders, analysts said.
EcoPro BM’s stock on Wednesday tumbled 19.15% to close at 328,500 won ($274.3) after The Korea Economic Daily reported the investigations. Its parent EcoPro plummeted 27.64% and its affiliate EcoPro HN Co. nosedived 27.59%.
The Financial Services Commission’s (FSC) capital market investigation unit launched onsite investigations of EcoPro BM several times around September of last year, according to the sources. Prosecutors of the financial and securities crime investigation team of the Seoul Southern District Prosecutors’ Office joined the probe.
Those authorities looked into allegations that EcoPro BM executives traded its stocks using confidential information before the company announced on Feb. 3, 2020, that it had won a 2.7 trillion won long-term supply contract with SK Innovation Co. EcoPro BM’s stock surged 20.98% to 64,000 won on the day. The share rallied for a ninth straight session to 89,500 won after the announcement.
IMMEDIATE PROBEThe FSC immediately fast-tracked the investigations after the regulator became aware of the allegations. To deal with a fast-track case, the authority usually launches immediate probes including raids in cooperation with prosecutors, not going through the Securities & Futures Commission that investigates unfair trading in the markets.
“We usually fast-track cases when they are serious or when we are concerned that key suspects could destroy evidence,” said an FSC source.
The authorities are also understood to be investigating whether some executives traded stocks under accounts of family members or acquaintances. Prosecutors are expected to indict key suspects after summoning them for interrogations.
“If indicted for insider trading, the existing contracts will be kept until the court makes a final ruling. But that could considerably disrupt winning new orders," said a secondary battery analyst at a local brokerage, asking not to be identified.
South Korea’s battery makers that signed deals with EcoPro BM are known to be taking the issue seriously.
The Korea Economic Daily has contacted key executives including EcoPro BM President Kwon Woo-seok several times for comments from earlier this month, but they either cut off contact or did not respond.
Write to Yun-Sang Ko at
kys@hankyung.comJongwoo Cheon edited this article.
