Kum Yang: Auditor Raises Flags on Viability as a Going Concern + Chairman Ryu Could Sell Shares

• On 28 March, the external auditor of Kum Yang (Samil PriceWaterhouseCoopers) raised warnings about the viability of Kum Yang as a going concern.

• The auditor also mentioned increasing probability of Chairman Ryu of Kum Yang potentially selling a portion of his shares to raise further capital.

• It is RARE for an auditor to raise concerns about a company's viability of the entity as a going concern. This is likely to negatively impact Kum Yang's share price.

On 28 March, the external auditor of Kum Yang (Samil PriceWaterhouseCoopers, PWC) raised warnings about the viability of Kum Yang as a going concern along with an increasing probability of the major owner of the company potentially selling a portion of his shares to raise further capital.

There were some delays in Samil PWC completing the 2023 annual audit of Kum Yang and now we know the reason for this delay. The external auditor is highly concerned about Kum Yang's financials unless the company could raise significant amounts of capital.

Kum Yang (001570 KS) has been one of the best performing stocks in Korea in the past two years. Its share price has surged more than 2,300% in this period. It currently has a market cap 6.6 trillion won and it is the 61st largest stock in KOSPI in terms of market cap.

It is RARE for an external auditor to raise concerns about a company's viability of the entity as a going concern, especially if it is among the top 100 companies in Korea. Therefore, this warning by Samil PWC should be taken seriously, in our view. This is also likely to negatively impact Kum Yang's share price in the coming weeks.

The auditor also pointed out liquidity problems could arise due to a rapid increase in debt. The internal accounting management system was judged inadequate for two consecutive years.