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The share prices of Naturalendo Tech, a KOSDAQ-listed herbal medicine maker, extended steep falls for four straight days, hit by allegations that its main healthcare product was fake.
The stock plunged by the daily limit of 15 percent to close at 45,400 won.
The firm has lost more than 1 trillion won ($929.97 million) in market capitalization since Wednesday, when the Korea Consumer Agency (KCA) claimed it had detected fake ingredients in the firm's best-selling product, EstroG-100.
The product is selling in the United States, Japan and several European countries, according to the company.
Based on sample test results, the agency claimed nearly 90 percent of EstroG-100 products do not contain ingredients extracted from Cynanchum wilfordii, a medical herb proven to be helpful in relieving menopausal symptoms.
Instead, they had ingredients from Cynanchum auriculatum royle, a herb unauthorized for medical use.
"The company refuses to accept our demand that it recall products in the market and dispose raw materials made with the unauthorized material," a KCA official said. "If the company keeps ignoring the demand, we will file a petition with law enforcement."
Naturalendo Tech has vehemently denied the claim, saying EstroG-100 is made only with Cynanchum wilfordii harvested in Korea. Naturalendo called the KCA's test "faulty."
It plans to file a lawsuit against the agency for disclosing what it claims is "misleading" data. It's seeking a reexamination by an independent research lab.
The firm has gone all out to calm perplexed investors and consumers.
"We have supplied independently secured seeds of Cynanchum wilfordii to our contracted farmers. And we perform stringent test at each step ― cultivation, harvest, drying, purchasing and warehouse storing," the company said in a statement posted on its English website.
Nevertheless, the situation appears to be unfolding against the company. The Financial Supervisory Service (FSS) said Monday it will launch an investigation into suspicious stock sales of the firm's key executive ahead of the KCA disclosure.
According to the FSS, a senior executive sold 10,000 shares in the company only days before the disclosure.
The company's massive short-selling of its own shares ahead of the disclosure is also subject to investigation, according to FSS officials.
"We don't rule out some executives made the sales using inside information, which was illegal," said an FSS investigator familiar with the case. Investigators will look into the recent transaction records of the people involved to determine the intention behind the controversial sales.
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