[Alpha Biz= Kim Jisun] SNT Holdings has officially put further investment in SMEC on hold, citing concerns over the company’s financial transparency and governance structure, intensifying tensions between the two sides ahead of the upcoming annual general meeting.

At a minority shareholder meeting on March 19, SNT Holdings outlined key issues related to SMEC’s financials, governance, and its acquisition of WIA Machine Tools, stating that “investment in SMEC will inevitably remain limited until confidence in its overall accounting practices is restored.”

SNT Holdings pointed to SMEC’s 2024 performance, noting declines of KRW 47.7 billion in revenue, KRW 41.8 billion in operating profit, and KRW 43.1 billion in net profit—all of which resulted in a swing to losses. It argued that attributing the downturn solely to external factors lacks sufficient justification.

The firm also raised questions over a sharp reduction in equity within a short period. SMEC’s total equity reportedly fell from KRW 173.6 billion in the third quarter of 2025 to KRW 94.9 billion by year-end, a drop of approximately KRW 78.7 billion. Considering capital inflows from a rights offering and treasury stock sales, SNT Holdings estimated that additional unexplained capital reductions of more than KRW 74.4 billion may have occurred, criticizing the company for failing to provide clear explanations or accounting grounds.

Regarding the acquisition structure of WIA Machine Tools, SNT Holdings argued that it effectively allows a private equity firm to secure control while concentrating financial risks on SMEC. It claimed that the investor group holds a 65.2% stake and majority board control, while SMEC bears obligations tied to high-yield preferential returns.

“If the approximately KRW 74.6 billion capital reduction in the fourth quarter of 2025 is linked to such return-guarantee structures, it may represent a structurally designed transfer of financial burden,” SNT Holdings said. It also warned that the deal, originally structured with an IPO in mind, faces increased uncertainty due to government restrictions on dual listings, potentially resulting in an unfavorable outcome where investors secure high returns while SMEC bears losses.

SNT Holdings noted that these concerns have directly impacted its investment decisions. Since changing its investment purpose to management participation in November 2025, the firm has not made additional share purchases, citing unresolved issues related to accounting, related-party transactions, and treasury stock disposal. It added that despite requesting access to accounting records and filing for an injunction, it has not received sufficient information.

The company also highlighted governance issues, claiming that treasury stock disposals resulted in losses of at least KRW 8.5 billion and raising concerns over internal transactions and accounting practices of overseas subsidiaries, which it said are directly tied to the reliability of financial statements.

SNT Holdings emphasized that SMEC’s challenges go beyond simple performance issues, describing them as “a combination of structural risks.” It proposed measures including a comprehensive management review, verification of joint investment structures, assessment of accounting appropriateness, and examination of potential asset misappropriation.

Additional recommendations included avoiding shareholder-dilutive financing, canceling treasury shares, improving internal transaction practices, and strengthening communication with shareholders.

Regarding opposition from SMEC’s labor-management council to SNT Holdings’ attempt to gain management control, SNT stated that while it respects the voluntary formation of labor unions, “if such structures are used as a tool for management defense, they could become a constraint on investment.”

 

 

 

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