Shareholders of South Korean jewelry maker J.Estina are under scrutiny for abusing insider information after selling off stakes just ahead of financial reports about its ballooning losses and a two-year losing streak.

Financial authorities said they are closely monitoring the listed company.

“(The financial watchdog) has yet to start investigating (J.Estina),” a Financial Supervisory Service official in charge of capital market surveillance told The Investor. “Once it does commence, we will look into whether the transaction was actually based on private information.”

Stock market operator Korea Exchange official in charge of market oversight declined to comment out of concern of further affecting the company’s stock price.

Courtesy of J.Estina

J.Estina claims key shareholders unloaded shares to attain cash to pay gift taxes and repay loans. On Feb. 12, the firm’s financial disclosure showed that Chairman Kim Ki-mun’s younger brother and co-Chief Executive Kim Ki-suk, along with other family members including the chairman’s daughters, sold off some 550,000 shares from Jan. 31 to Feb. 12. This accounted for 3.3 percent of the company, the market cap of which reached 135.2 billion won (US$120.1 million) as of that day.

Stock prices also took a plunge by 11.5 percent on that same day. After the market closed, J.Estina announced it had logged some 860 million won in preliminary operating losses in 2018, up 1,677 percent on-year, for two consecutive years, while its revenue shrank 9 percent to 27.3 billion won.

About a week later on Feb. 18, J. Estina stock prices edged up just 0.1 percent, barely managing to snap a five-day losing streak. 

Courtesy of J.Estina

Founded in 1988, J.Estina, formerly known as Romanson, has been trading on Korea’s second-tier bourse KOSDAQ since 1999. The company operated a now-defunct production line in North Korea’s Kaesong joint industrial park and has been considered one of the “North Korea-themed stocks” whose price volatility widens on geopolitical news.

By Son Ji-hyoung (consnow@heraldcorp.com)