Samsung BioLogics’ shares down $6bn after accounting furore

Samsung BioLogics’ shares have been hit hard, after the South Korean company was handed a notice of suspected breach of accounting rules by the country’s financial regulator.

The notice was enough to send shares in the company spiralling down by 17.2% for the third largest contract manufacturer in the business, wiping $6 billion from the value of the company.

The Financial Supervisory Service (FSS) is South Korea’s financial regulator and it concluded that Samsung BioLogics had committed fraud when it assessed the value of Samsung Bioepis in late 2015, shortly before the company went public in 2016.

Samsung BioLogics countered with a press conference arranged immediately after the announcement, where Sim Byung-hwa, Managing Director at Samsung Biologics, said, "It is not fraudulent accounting as we applied accounting standards after consultation with outside experts […] Samsung Biologics has no motive to intentionally rig accounting books and there was no actual profit".

Prior to going public, Samsung Biologics had operated at a loss from its founding in 2011, onwards. However, just before going public, it reported a net profit of $1.8 billion – based on the value of Samsung Bioepis, after it had achieved success in developing biosimilars to blockbuster treatments.

The actual method of determining the worth of the company changed from being determined by its market value, as opposed to its book value.

Samsung BioLogics suggested, on a press release on its website, that the decision was verified by external auditors in 2016 – naming PwC Samil, KPMG Samjung and Deloitte Anjin as three accounting firms that have been involved in the process.

The next step will be taken by the FSS, which undertook a year-long probe before releasing the notice and suggested that the final outcome of the investigation will be revealed in due course. This could be followed by punitive actions or other measures.

There are suggestions that Samsung BioLogics would pursue legal action should the FSS take action against the company.

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