South Korea’s FSS orders Dunamu to correct Naver Financial merger disclosure over missing details

South Korea’s FSS has asked Dunamu, the operator of Upbit, to correct its disclosure regarding its merger with Naver Financial, claiming that important details were omitted. 

Meanwhile, Korea Investment & Securities has positioned itself as a potential buyer of Coinone, following its rival Mirae Asset Group’s acquisition of Korbit. 

Why did the FSS issue a correction order for Dunamu and Naver?

South Korea’s Financial Supervisory Service (FSS) has officially ordered Dunamu, the operator of the largest Korean exchange, Upbit, to correct its disclosure of the comprehensive stock exchange with Naver Financial.

According to the FSS, the report submitted by Dunamu on March 30 contained “important omissions or false statements.” The financial regulator specifically pointed to two sections of the report: the “plan for future company restructuring” and “important matters related to other investment judgments.”

In the original report that was flagged by regulators, Dunamu stated that no specific decisions had been made about restructuring the company after the stock exchange was completed. 

Dunamu added that any future decisions or board resolutions will be disclosed in accordance with regulations. 

The company also disclosed that Naver would secure voting rights in Naver Financial through contracts between major shareholders. Following the stock exchange, Naver Financial would remain a consolidated subsidiary of Naver. The share value ratio between Dunamu and Naver Financial was specified as 3.064569:1.

The company explicitly warned investors that the stock exchange could face delays or cancellation due to the need for approval from the Fair Trade Commission, approval for changes to Naver Financial’s major shareholders under the Credit Information Act, and changes to Dunamu’s major shareholder status under the Specific Financial Information Act. 

Additionally, Dunamu noted that the ongoing legislative process for the Digital Asset Framework Act could affect the progress and outcome of the stock exchange. Reports from mid-March show that discussions about the framework had faced delays, and it was even left off the agenda of a key government meeting on March 19. 

Who is looking to acquire a stake in Coinone?

Korea Investment & Securities is working to persuade financial authorities and politicians regarding the acquisition of Coinone shares. 

An official familiar with the matter stated that the company is following a similar path to its rival, Mirae Asset Group, in its acquisition of Korbit.

Coinone ranks third among Korean exchanges, with a double-digit market share, but it has recorded deficits for three consecutive years. Financial authorities are pushing to limit the stake sizes of major shareholders in exchanges, so it is expected that some of the 53.44% stake held by CEO Cha Myung-hoon will be sold. 

While several domestic companies have expressed interest in the shares, a significant gap in price expectations has prevented solid deals. Korea Investment & Securities, however, has significant financial power. 

Market observers suggest that Korea Investment & Securities would need to buy about 20% of the shares to enter the deal without infringing on the CEO’s management rights. The acquisition of Korbit by Mirae Asset Consulting for approximately 133 billion won (about $93 million) is expected to serve as a pricing reference point. 

Coinone responded to the reports by confirming that various collaboration proposals have been coming in due to increased interest in the virtual asset business, but that while it has discussed collaborations with various parties, the specific model, method, or target has not been determined.

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