Fadu Shares Surge 30% as Trading Resumes Amid Semiconductor Boom

A South Korean semiconductor firm at the centre of a major "hollow listing" controversy has seen its shares surge by 30% on the first day of trading after a suspension lasting more than a month. Korea Exchange announced the resumption of trading in Fadu on 2 February, ending a suspension that began on 19 December following indictments against the company's management for allegedly concealing knowledge of cancelled orders.

The dramatic market rebound comes as the company announces new leadership and reports record contract wins amid a global semiconductor boom, raising questions about South Korea's approach to handling alleged corporate misconduct during trading suspensions.

Background and Context

Fadu, founded in 2015 as a fabless semiconductor company specializing in SSD controller design, had been recognised in the industry for developing proprietary architecture with superior power efficiency and heat management. However, controversy erupted in 2023 when the company's actual performance of 22.5 billion Korean won fell dramatically short of its annual sales forecast of 120.2 billion Korean won shortly after its public listing.

The shortfall occurred during a broader downturn in the memory and SSD industries, with even established players like Samsung Electronics and SK Hynix reporting losses. Despite these market conditions, prosecutors moved forward with indictments against Fadu's management, alleging they had concealed knowledge of order cancellations, leading the Korea Exchange to suspend trading.

Key Figures and Entities

Lee Ji-hyo, Fadu's co-founder, announced his resignation as CEO coinciding with the trading resumption decision, with the company transitioning to a single CEO system led by semiconductor expert Nam Eui-hyun. According to a statement from the Fadu Shareholders' Alliance, Lee's departure was interpreted as "a move to resolve the 'owner risk' and market uncertainty caused by the prosecution's indictment and to be evaluated solely on technological capabilities."

The company has recently secured contracts worth hundreds of billions of Korean won from major global technology companies, with disclosures to the Financial Supervisory Service showing sales growth from 22.5 billion Korean won in 2023 to 43.5 billion Korean won in 2024, reaching 68.5 billion Korean won in the first three quarters of 2025, with a projected transition to profitability this year.

Legal and Financial Mechanisms

South Korea's capital markets operate under a strict system that immediately suspends trading upon prosecution indictment, a approach that critics argue can severely impact operational viability. During Fadu's suspension period, one major partner under contract discussions reportedly requested a 'risk audit', effectively isolating the company from normal market functions despite its continued generation of sales.

Prosecutors specifically indicted Fadu's management for submitting false materials intended to deceive both the exchange and underwriters. However, questions have been raised about the broader responsibility of the listing ecosystem itself, with some industry observers asking whether underwriters receiving substantial fees and the exchange as a verification body should bear some responsibility for failing to detect the alleged misrepresentations.

International Implications and Policy Response

The case highlights stark differences in how different jurisdictions handle allegations of corporate misconduct. In the United States, authorities typically impose post-facto penalties and allow market judgment to operate rather than implementing extended trading suspensions. For instance, when Nvidia faced allegations in 2018 of misleading investors by disguising cryptocurrency mining revenue as gaming revenue, trading continued throughout the investigation, with the SEC ultimately imposing a $5.5 million fine four years later.

Industry insiders argue that South Korea's rigid approach risks stifling the venture ecosystem, particularly for technology startups in strategic sectors like semiconductors. The fabless sector currently represents a relatively small portion of South Korea's semiconductor industry, but companies like Fadu are viewed as valuable assets for diversifying the country's technology landscape beyond its traditional dominance in memory chips.

Sources

This report draws on disclosures from the Financial Supervisory Service, Korea Exchange trading records, and official statements from the Fadu Shareholders' Alliance. Additional context was provided by publicly available financial information from Samsung Electronics, SK Hynix, and historical SEC enforcement actions against technology companies.