In the latest accounting scandal to hit a major global corporation, Samsung’s biotech unit, Samsung BioLogics, suffered a $6 billion market value loss on Wednesday (May 2) after South Korea’s financial regulator revealed evidence the company violated accounting rules, according to Reuters reports.
Shares in the company dropped by nearly 20 percent after revelations by the Financial Supervisory Service (FSS). The watchdog said earlier in the week that it issued a preliminary notice to Samsung BioLogics and its auditors of possible action in response to suspicions that the company inflated net profits ahead of its 2016 initial public offering (IPO).
At the time, the company’s float was South Korea’s second-largest share sale, earlier Reuters reports said.
According to the publication, the FSS did not go into details about the allegations of accounting misconduct. But Samsung BioLogics has denied the accusations and said in an emergency press conference that it is considering filing a lawsuit against the regulator.
“If a decision is made that we cannot accept, we plan to file an administrative lawsuit,” the company’s Vice President Byunghwa Shim said in a statement during the press event. The company vowed to prove it adhered to accounting rules.
Earlier this year, the head of the FSS, Choe Heung-sik, stepped down following revelations of a hiring scandal while serving as president of the Hana Financial Group. Those revelations emerged as the FSS began an investigation of unfair hiring practices at the nation’s largest banks; that probe found Hana Financial Group and its KEP Hana Bank among the worst offenders.
Samsung has faced a string of scandals in recent months, beginning with the arrest of Jay Y. Lee, heir to Samsung Group, on charges of bribery and embezzlement. Ever since, Samsung Group, along with other major family-run companies in the country, have faced increasing pressure for transparency, reports said.
Samsung Group posted its highest operating profits in the company’s history in its first quarter report for 2018, released last month. A $14.5 billion profit signaled a 5.8 percent year-over-year increase and beat analyst expectations. Consolidated revenue increased 20 percent year over year, while sales jumped 43 percent year over year.