From 'Fraud Controversy' to the President's Rebuke... Dawonsys at the Crossroads of Delisting Due to a 'Disclaimer of Opinion' at the Worst Possible Timing

Dawonsys, a company specializing in the manufacturing of rolling stock and special power supplies, has fallen into a comprehensive management crisis and is facing the risk of being ousted from the KOSDAQ market. With intense criticism from the government, a police investigation, massive deficits, and a 'disclaimer of opinion' from its external auditor all overlapping, the anxiety of the market and shareholders has reached a peak.

Established in 1996, Dawonsys is a company that has grown by focusing on the manufacture of special power supplies, such as nuclear fusion power supplies and plasma power supplies. Later, in 2015, it formed a consortium with Rowin Co., Ltd., which was engaged in the rolling stock business, and entered the rolling stock market in earnest, growing railway vehicle manufacturing into the company's core flagship business.

[Source: Dawonsys Website]

Endless Delivery Delays and the Stigma of 'Fraud'

The core reason Dawonsys has recently emerged as a social issue is 'habitual delays in rolling stock delivery' to public institutions and the resulting insolvency problems.

Dawonsys signed a 914.9 billion won contract with the Korea Railroad Corporation (KORAIL) to introduce 474 new 'ITX-Maum' cars, but delayed the delivery of 218 cars, nearly half of the total. In a 220 billion won project signed with Seoul Metro to replace aging rolling stock on Line 5, it failed to deliver even the initial vehicles, eventually resulting in the unprecedented situation of being sued for fraud by Seoul Metro.

In response to this paralysis of the public procurement system, the Ministry of Land, Infrastructure and Transport identified circumstances such as delivery delays and misappropriation of advance payments and requested a police investigation. In December of last year, President Lee Jae-myung directly targeted Dawonsys and poured out intense criticism, saying, "Hasn't the government agency been defrauded?" Following this, the company's credibility plummeted to the bottom as it even received a notice of termination for a 113.8 billion won contract to supply rolling stock for the Sinansan Line with private entities such as POSCO E&C.

Opaque Management and Financial Ruin That Turned Even the Auditor Away

While the company is on the verge of survival due to delivery delays and judicial risks, it recently suffered a direct hit when it was notified of a 'disclaimer of opinion' by its external auditor (Samil PwC) regarding its 2025 financial statements. As a result, stock trading has been completely suspended since March 17, and earnest delisting procedures have begun. The background of the disclaimer of opinion presented by Samil PwC is largely twofold.

Dawonsys' financial condition has deteriorated uncontrollably due to delay damages and cost burdens resulting from delivery delays. On a separate basis for 2025, it shifted to a massive deficit, recording an operating loss of 108.1 billion won and a net loss of 192.4 billion won. In addition, its total equity currently stands at -515.6 billion won, completely wiping out its capital stock (19.1 billion won) and plunging into a state of 'complete capital impairment'. Experiencing a severe liquidity crisis where current liabilities exceed current assets by a staggering 723.5 billion won, significant doubts have been raised about the going concern assumption regarding whether normal business operations are possible.

Even the basic documents essential for the financial audit were not submitted. The external auditor stated that it was unable to perform the audit because it did not receive key documents from the company to verify percentage-of-completion revenue and cost of sales, goodwill valuation, financial asset valuation, and completeness of contingent liabilities, along with the 'Management Representation Letter' signed by management. In the evaluation of the internal accounting control system, a 'disclaimer of opinion' was also issued as multiple 'material weaknesses' were found, indicating an inability to identify and correct errors in the financial reporting process.

Management Rights Sale on the Edge of a Cliff and Appeal Against Delisting

Amid this management ruin, it was revealed that CEO Park Sun-soon pocketed a massive remuneration of 1.656 billion won, including 1.01 billion won in holiday bonuses and performance incentives last year, drawing the ire of minority shareholders.

Currently, Dawonsys is attempting to transfer management rights and reform the company through a third-party allotment capital increase to sell its stake to the Engineering Guarantee Insurance. However, to make matters worse, as KORAIL provisionally attached 16 billion won worth of Dawonsys' real estate and receivables and filed a lawsuit for damages, the burden on the acquiring entity, the guarantee insurance, has increased, making even this prospect unclear.

Dawonsys can file an appeal against the delisting by April 13 in accordance with the regulations of the Korea Exchange. However, if it fails to resolve the massive capital impairment and the reasons for the auditor's disclaimer of opinion within a short period, it is expected to be difficult to avoid expulsion from the KOSDAQ market.