[Edaily Marketin Reporter JI YEONG-EUI ] Stick Investment’s Credit Division (Stick Credit), a private equity fund (PEF) manager, has purchased approximately 130 billion won worth of shares in KOSDAQ-listed Seojin Systems. The company acquired a portion of the shares held by Jeon Dong-kyu, CEO of Seojin Systems and the company’s largest shareholder.

As CEO Jeon, who had been staying in Vietnam due to tax-related risks there, returned to South Korea on the very day the share transaction was completed, attention is now focused on whether financial authorities will investigate the appropriateness of the prior profit-taking transaction.

According to the Financial Supervisory Service’s electronic disclosure system on the 12th, CEO Jeon sold 2.5 million shares of Seojin Systems over-the-counter on the 10th. The counterparty was Stick Sequoia Holdings, a special purpose company (SPC) established by Stick Credit. The sale price was 51,700 won per share, with a total transaction value of 129.3 billion won. This represents a 9.2% premium over the closing price on that day. The former CEO disclosed the purpose of the transaction as “lending company funds.”

Stick Credit established a downside protection mechanism by entering into an agreement with former CEO Jeon and the shareholders for this transaction. Under this structure, Stick Credit received 3.5 million shares held by former CEO Jeon as collateral and is guaranteed an internal rate of return (IRR) of approximately 12%. It is reported that former CEO Jeon was also granted a call option allowing him to repurchase the shares at a predetermined price in the future.

Meanwhile, it was confirmed that the former CEO, who had been subject to a travel ban related to tax risks in Vietnam, returned to South Korea on the morning of the 10th, when the transaction was finalized. The former CEO had been staying in Vietnam for an extended period after being placed under a travel ban due to unpaid taxes during a local tax audit.

While concerns about a management vacuum have been partially alleviated by the CEO’s return, market attention is shifting to the appropriateness of the profit-settlement transactions Mr. Jeon had previously entered into with securities firms. This is because the largest shareholder conducted transactions to settle profit margins based on stock prices before the related risks—namely, the tax risks in Vietnam and the CEO’s travel restrictions—were fully disclosed to the market. It has been pointed out that the potential use of material non-public information or the misleading of investors could become a focus of the financial authorities’ investigation.

This is also why there is speculation that financial authorities may move to directly verify the relevant facts with the former CEO upon his return to Korea. In fact, it is understood that the Financial Supervisory Service has requested explanations from Shinhan Investment Securities and Hana Securities regarding the facts of the matter, as these firms entered into retroactive agreements to settle stock price gains during the former CEO’s bridge financing process.