The Korea Times

Food authoritie­s accuse Namyang over irregulari­ties

- By Park Jae-hyuk

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.

 ?? Yonhap ?? Namyang Dairy Products’ Bulgaris yogurt is on display at a supermarke­t in Seoul, Wednesday.
Yonhap Namyang Dairy Products’ Bulgaris yogurt is on display at a supermarke­t in Seoul, Wednesday.

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