Food authorities accuse Namyang over irregularities
The Ministry of Food and Drug Safety accused Namyang Dairy Products of breaching the Act on Labeling and Advertising of Foods, Thursday, by announcing Bulgaris yogurt drinks were supposedly effective against COVID-19.
“Without animal experiments or clinical trials, Namyang announced Bulgaris was effective against COVID-19,” the ministry said in a press release.
This came after the Korea Exchange (KRX) started an investigation into the dairy firm for alleged insider trading, following a momentary hike in its stock price which came following the announcement.
“Regarding the company’s press release about the announcement, we are looking into the trading of its stocks to find out whether there were any unfair transactions based on undisclosed information,” KRX market oversight department head Nam Seung-min said. “If we discover any suspicious conduct, we will request the investigation department to undertake an in-depth probe, and the department will inform the Financial Supervisory Service (FSS) of the matter once it finishes the investigation.”
The dairy firm said in its Tuesday press release that the company’s researcher Park Jong-soo delivered a speech in a symposium on antiviral foods that day claiming Bulgaris could reduce the risk of influenza and coronavirus infections.
“According to the experiment with Bulgaris fermented milk, we found out it can kill 99.999 percent of influenza virus and 77.8 percent of the coronavirus,” he said in the event, according to the press release.
This led to an 8.57 percent rise in Namyang’s share price, Tuesday, and a further 28.68 percent hike the next morning. Its preferred share price also hit the daily limit high, immediately after the opening of Wednesday’s session.
However, it was reported later that the dairy firm had conducted the experiment by pouring the yogurt drink over animal cells infected with the viruses.
After multiple disease experts denounced the results of the experiment as exaggerations and the nation’s health authorities said the experiment does not guarantee any effect on human bodies, the prices of Namyang’s ordinary and preferred stocks plunged and closed Wednesday at 5.13 percent and 6.18 percent lower than the previous session’s closing prices, respectively. Their prices continued to fall the next day, closing respectively at 4.85 percent and 0.9 percent lower than Wednesday’s closing.
According to the KRX, the combined amount of retail investors’ net purchases of Namyang’s ordinary and preferred stocks on Wednesday surpassed 5.4 billion won ($4.8 million). Most of them are presumed to have bought their stocks at the highest prices.
They are calling for the financial authorities to investigate the company to discover whether or not it had tried to manipulate its stock prices.
The FSS has maintained a cautious stance on Namyang’s alleged breach of the Capital Markets Act because it remains to be proven that the company’s recent announcement was intended to raise its stock price.
“We will undertake an investigation, if the KRX informs us of suspicious trading,” said Park Bong-ho, head of the FSS capital market supervision department.
The watchdog can also start an investigation without notification from the KRX, if the prosecution requests it or investors having evidence of unfair transactions file complaints.
Some securities industry insiders pointed out that a continued rise in Namyang’s share price between last Friday and Tuesday without any favorable news may indicate that there had been insider trading. Local brokerage firms have not published an analysis of the firm since 2018, as its stock price has remained sluggish amid a nationwide boycott of its products, in light of reports of misconduct by its owner family members and abusive practices against sales agents.
The recent incident is also interpreted as part of Namyang’s attempts to restrain Brandes Investment Partners, a foreign mutual fund that increased its stake in the Korean firm to 8.27 percent by acquiring an additional 1.03 percent stake, April 1, amid its continued purchasing of Namyang shares since last July.
Brandes previously changed the intention of its holding of its Samchully shares in 2018 to participate in the clean energy company’s management, when it was the third-largest shareholder, so market insiders speculate that Namyang may have regarded the foreign fund as a potential threat. The stock price hike can make it difficult for the fund to buy additional shares.