[Alpha Biz= Paul Lee] South Korean prosecutors have alleged that semiconductor design firm Fadu concealed the suspension of orders from a key U.S. aerospace client while pursuing its KOSDAQ listing, according to an indictment related to the company’s alleged inflated IPO projections.
According to an exclusive report by JoongAng Ilbo on March 4, the Seoul Southern District Prosecutors’ Office’s Joint Financial and Securities Crime Investigation Unit identified the company’s major customer as a U.S. aerospace firm, referred to as Company A.
Prosecutors stated in the indictment that Company A notified Fadu during a video conference about a halt in orders in May 2023, about a month after a failed rocket test launch on April 20. That date corresponds with the failed first orbital test flight of SpaceX’s Starship rocket, which exploded mid-flight.
According to the prosecution, Company A’s last order placed with Fadu was in August 2022, yet Fadu allegedly concealed the order suspension and submitted documents suggesting the business relationship remained active.
Prosecutors claim Fadu included false information in its revenue projections submitted to the Korea Exchange (KRX) during the preliminary listing review. The company’s materials stated that it had verbally received information from the client indicating about 3,200 units would be sold in the fourth quarter of 2023, which investigators say was untrue.
Authorities said they secured video meeting records and messenger conversations between Fadu and the client as evidence.
Fadu and several executives were indicted on Dec. 18 last year on charges of violating the Capital Markets Act. Prosecutors allege that despite being informed of declining orders from key clients—including the U.S. aerospace firm and SK hynix—the company concealed the information and proceeded with a pre-IPO fundraising round that valued the firm at over 1 trillion won ($750 million).
Executives are also accused of realizing more than 10 billion won in stock trading gains during the process.
In its securities filing before the August 2023 KOSDAQ listing, Fadu projected annual sales of about 120.3 billion won, but actual revenue for the year reached only 22.5 billion won.
Trading in Fadu shares, which resumed on Feb. 3, was designated as an “investment caution” stock on March 4 by the exchange, with the possibility of being further classified as an investment warning stock if volatility continues.
In a letter to shareholders released on Feb. 2, Fadu said controversies surrounding past legal issues were overshadowing the company’s technology and business potential, adding that it had decided to reorganize its board so it could focus on future growth.
The company has denied wrongdoing, saying it will address the allegations through the upcoming trial process.
The first preparatory hearing in the case, originally scheduled for Feb. 26, was postponed after Fadu requested a change in the court date. The Seoul Southern District Court is now set to hold the hearing on March 19.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
