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STC Life Stock Prices In Jeopardy

Posted May. 16, 2007 07:52,   


The KOSDAQ listed share prices of STC Life plunged due to the controversy over a subsidiary product’s efficiency and fraud charges against its chairman.

The drop was particularly surprising as the company recently saw its stock price skyrocket. The share price soared to its daily upper limit for five consecutive days when the purchase of STC Life stocks by the Joongang Daily chairman was made public in last October.

If the price drop continues, minority shareholders who own 19 million stocks in total as of late last year will suffer losses.

On May 15, STC Life’s KOSDAQ price dropped by 400 won (14.93%) from the previous day to close at 2,280 won, hitting its lower limit for two straight days.

About 5.35 million shares or 8.17% of the firm’s total were sold yesterday alone, showing the high probability of a further price decline.

This price drop was attributable to two factors.

First, MBC’s news analysis program, “Newswho (Behind the news),” covered the controversy over “Energy Water,” a product of STC Nara, which is a subsidiary of STC Life. On May 12, the program questioned whether the product is effective.

Second, it was revealed recently that STC Chairman Lee Gye-ho is facing charges of fraud and of violating the direct sales law. His trial is now underway.

MBC said, “Energy Water’s efficiency in treating cancer is exaggerated. Moreover, Honolulu University doesn’t have a course for a doctor’s degree in Science and Medicine, which Chairman Lee, the majority shareholder, claims to have received.”

In response, Gwak Jong-mahn, a director at STC Life, said, “We have the results of efficiency trials and experiments for Energy Water. We will also post on the company webpage Chairman Lee’s certificate of a science doctoral degree given by Honolulu University in 1993.”

In the meantime, Chairman Lee was prosecuted without arrest on charges of raising illegal funds worth 2.7 billion won by forging books and lying about the commissions received from direct sales. His trial is being held at the Seoul Central District Court.

“The charges have nothing to do with STC Life because they are related to past sales of STC International, a multi-level marketing company that Chairman Lee is the biggest shareholder in,” explained an insider with STC Life.

Until mid October of last year, STC Life stock prices were between 1,500 and 1,600 won per share with a par value of 500 won. But the price increased to the daily upper limit for five straight days when the Joongang Daily chairman’s ownership of STC Life convertible bonds worth 6 billion won on October 30 was disclosed.

With the advantage from celebrity’s stock ownership and bright business prospects for the company’s BT products, its stock price soared to 8,690 won on January 9 this year. However, a three-quarter drop in price now raises concerns for huge losses by investors.

Currently, Chairman Hong holds the second largest share of STC Life (23%, convertible bonds included) after Chairman Lee (42%). “No shares held by chairman Hong have been sold for raising profit,” said an official at the company.