JLK, a Kosdaq-listed medical AI company, has come under fire after its executives sold their shares. The company has apologized and promised to buy back and burn shares, but restoring trust isn't easy.
According to the company’s public disclosure on Monday, JLK Vice Presidents Kang Shin-wook and Lee Myung-jae each sold 242,500 shares, amounting to 1.51 percent of JLK's total outstanding shares from Nov. 6 to 10. Combined, they sold 485,000 shares, 3.02 percent of the total.
These shares, acquired through stock options exercised in April at a price of 2,500 won ($1.89) per share, yielded significant profits. With market prices ranging from 24,537 won to 30,227 won, the executives realized a total of 11.5 billion won, or 5.7 billion won each.
In particular, the share sell-off coincided with the designation of the company's AI-based cerebral infarction classification solution, JBS-01K, as non-reimbursable, leading to a surge in share prices. Earlier in the month, JLK had touted its market penetration potential and sales expansion in a series of press releases.
Following the news of the executives selling all their shares, JLK's stock price plummeted to 20,550 won during intraday trading on Monday, down 16.46 percent from Friday closing price of 24,600 won. JLK stock closed at 21,800 won on Monday, down 11.38 percent from Friday.
In response to market concerns, JLK CEO Kim Dong-min posted an apology on the company's website. Kim clarified that the executives' stock sell-offs were due to personal circumstances, with the company having no prior knowledge.
"We could not foresee or prevent the on-market sale of shares held by incumbent non-registered executives due to their personal circumstances, causing concern to shareholders and investors. As the CEO, I sincerely apologize," Kim said. He acknowledged the embarrassment, considering JLK's robust business and promising future.
Kim said the company would fulfill its ethical responsibility to shareholders and investors for this situation.
“As part of our shareholder return policy, we intend to repurchase 40 percent of our future free cash flow at the time of full-scale revenue generation through on-market repurchases and burn 100 percent of our shares. We will do everything in our power to ensure that this issue is passed by the board of directors and realized as soon as possible," he said.
He also stressed that all incumbent executives are united by their unwavering belief in the company’s growth and future value.
“We will continue to work together to improve the interests of our shareholders, aiming to become a global medical AI company," Kim said, suggesting that the two vice presidents involved in the incident will retain their current positions.
Despite Kim's apology, the controversy is unlikely to die down.
Shareholders are asking why anyone would trust and invest in the company in the face of the management issue. Some industry insiders speculated that there are doubts about the profitability of the company's medical AI business, even among JLK insiders.
"It doesn't make sense that the company didn't know about the executives' stock sale. If they didn't, that's a bigger problem," remarked an industry executive. "For top managers to take such actions as the company enters an expansionary phase, about to market a non-reimbursable product for the first time, raises concerns about their perception of the company's business outlook."