[Edaily Marketin JI YEONG-EUI Reporter] There is a long-standing adage in the securities industry : “What the market hates most is not bad news, but uncertainty.”This is because when bad news is disclosed, the market immediately reflects it in prices; however, if information is delayed or provided incompletely, investors cannot even gauge the magnitude of the risk. Sometimes, uncertain bad news—whose true nature is obscured—can trigger excessive market fear and cause corporate valuations to plummet.

Amid a recent spate of overseas tax risks surfacing for major domestic listed companies, the stark disparity in the timing of their disclosures has come under scrutiny. Although both companies contested the tax assessments, KOSPI-listed DL E&C CO., LTD.(375500)immediately explained the relevant facts and its rationale to the market on the day the notice was issued, whereas KOSDAQ-listed SEOJIN SYSTEM CO., LTD(178320)merely reflected the matter retroactively through a revised quarterly report only after the large-scale tax payment had been completed.

In Compliance with Disclosure Obligations… DL E&C CO., LTD., Facing Risk, Discloses Detailed Rationale for Appeal

DL E&C CO., LTD. disclosed the relevant details on June 22, the very day it received a notice from Saudi tax authorities regarding an 8533억원 corporate tax assessment. The assessed amount represents 16.27% of the company’s equity. Under the KOSPI disclosure regulations, this amount exceeds the threshold for “imposition of fines, etc.” requiring ad hoc disclosure for large-scale corporations. DL E&C CO., LTD.’s disclosure was not so much an act of special goodwill toward investors as it was a faithful fulfillment of its obligation as a listed company to make ad hoc disclosures.

However, the disclosure went beyond a simple notification of the amount. DL E&C CO., LTD. provided the imposing authority, the assessed amount, the ratio relative to equity, and the date of confirmation, along with the grounds on which the company considers the tax assessment to be unjust. It explained in detail the grounds for its appeal, including the statute of limitations for the assessment and the possibility of double taxation. The disclosure also covered local appeal procedures, the mutual agreement procedure between countries, and the possibility of deferring payment during the appeal process. In effect, the company presented the facts of the assessment and its rebuttal arguments to the market in concrete terms. From an investor’s perspective, this allowed for a detailed understanding of whether an immediate cash outflow would occur, the logic the company intended to use in its challenge, and how future procedures would unfold.

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ction Following Payment and FSS Intervention… SEOJIN SYSTEM CO., LTD. Also Faces Liquidity Pressure

In contrast, SEOJIN SYSTEM CO., LTD. did not reflect the tax risk related to its Vietnamese subsidiary—which first arose last February—in its original first-quarter report; it belatedly corrected and reflected the information only in June. The correction to the quarterly report came after the Financial Supervisory Service (FSS) became aware of the tax issue and launched an investigation into the facts. On the 25th, SEOJIN SYSTEM CO., LTD issued a corrective disclosure to its first-quarter report, stating that its subsidiary, Seojin Vietnam, had received tax assessment notices totaling approximately 118.256 billion won for import value-added tax and other taxes from February 6 to May 18. The company paid these amounts in three installments between April 22 and May 20. On June 11, it also obtained a bank guarantee for late payment penalties totaling 38.007 billion won. The company explained that it is currently in the process of filing an appeal regarding 101.304 billion won of the total amount due.

SEOJIN SYSTEM CO., LTD’s tax risk did not remain at the mere notification stage, as actual payments and a bank guarantee were secured. While consolidated cash and cash equivalents stood at 29.3 billion won at the end of the first quarter, the taxes subsequently paid by its Vietnamese subsidiary amounted to 118.2 billion won. At the end of the first quarter, current liabilities stood at 1.5485 trillion won, exceeding current assets of 1.3575 trillion won, and net cash outflow from operating activities for the first quarter was 24.2 billion won. Regardless of whether the company challenges the tax assessment and seeks a refund, the actual occurrence of cash outflows inevitably remains a critical factor for investors to consider.

Why the “Decision to Disclose” Matters… The Later It Is, the Higher the “Cost of Restoring Trust” Becomes

Stock price trends varied depending on when investors received accurate information. When DL E&C CO., LTD. made its disclosure after the market closed on June 22, the closing price was 69,200 won; on the following trading day, June 23, it fell 13.73% to 59,700 won. As of June 26, the stock price stood at 59,200 won, down 14.45% from before the disclosure. This suggests that the market priced in the negative news of the tax assessment notice after it was made public.

Although reports of SEOJIN SYSTEM CO., LTD’s failure to disclose information surfaced after the market closed on June 4, the stock price rose by 1.30% on the following trading day, June 5, from 69,200 won to 70,100 won. The company explained on its website that the tax amount had not yet been finalized and that disclosure was not required at this stage; consequently, some market participants interpreted this to mean that the tax risk was limited in the short term. However, the stock price turned bearish after the 16th and fell to 48,850 won on June 26, following the revision of the first-quarter report. This represents a 29.41% decline compared to June 4, when the tax risk first surfaced.

The stock prices of both companies could fall further or rebound. It is not important which of the two companies, both facing similar risks, saw a steeper decline. From this point on, it is a matter of investor judgment.

DL E&C CO., LTD. provided the market with information to assess the risk immediately after it arose. In contrast, SEOJIN SYSTEM CO., LTD. initially stated—even after related media reports—that the tax amount was undetermined and that the matter was not subject to disclosure; it only revised its first-quarter report once the Financial Supervisory Service (FSS) began verifying the facts regarding the adequacy of its disclosure. In the meantime, capital raising and share transactions took place by capitalizing on stock price fluctuations, and efforts to attract additional investment are currently underway.

From an investor’s perspective, while the outcome of the tax dispute is important, they cannot help but remember that the company failed to disclose unfavorable information in a timely manner. If a company delays disclosing important information once and only reflects it belatedly, skepticism will inevitably arise as to whether its disclosures can be fully trusted should a larger risk arise in the future.

SEOJIN SYSTEM CO., LTD’s future disclosure practices will be crucial to restoring market confidence. The outcome of the tax assessment dispute with the Vietnamese tax authorities is a separate matter. The key, according to analysts, is how promptly and comprehensively the company discloses major risks that could influence future investment decisions.