Rainbow Robotics shares shed half their value as insider-trading probe, China rivalry weigh

"Some people made 1 billion won," a Rainbow Robotics official said.

Rainbow Robotics, once the undisputed leader among Kosdaq-listed robot stocks after climbing from around 10,000 won ($7) to nearly 1 million won a share, is now in freefall. The share price has collapsed to the 400,000-won range — roughly half its peak — as a string of setbacks hit just as the stock was approaching "emperor share" status.

According to Korea Exchange, Rainbow Robotics shares closed at 456,000 won on Friday, down 3.18 percent from the previous session. The slide began in June, when prosecutors launched an investigation into company insiders on charges of front-running trades. Analysts also point to the planned listing of Chinese rival Unitree Robotics and a sudden cooling of investor enthusiasm for robot stocks as key drivers of the decline.

The Financial Services Commission's Securities and Futures Commission had referred the case to prosecutors after finding that Rainbow Robotics insiders used non-public information to generate illicit gains. The suspects are alleged to have traded shares using inside knowledge of Samsung Electronics' acquisition of a stake in Rainbow Robotics between 2022 and 2024, reaping more than 1 billion won in improper profits.

Rainbow Robotics listed on Kosdaq in 2021 but spent years in obscurity, with its share price stuck near its IPO price of around 10,000 won. That changed when robots emerged as a hot growth sector and Samsung Electronics moved to acquire the company, sending the stock soaring to nearly 1 million won. The surge set off a frenzy among retail investors, with many boasting they had bought in at 100,000 won or 200,000 won a share.

Prosecutors believe some of those who profited took out loans to buy shares or tipped off acquaintances, enabling them to pocket illicit gains.

Some analysts have argued that the stock had become overvalued, inflated by expectations surrounding Samsung Electronics becoming its largest shareholder and the broader excitement over humanoid robots. The valuation burden has grown heavier as the company continues to post losses despite rising sales.

Rainbow Robotics reported second-quarter sales of 12.31 billion won, up 97.9 percent from a year earlier, while operating losses came to 2.03 billion won. For the first half of the year, cumulative sales reached 21.38 billion won and the operating loss stood at 3.59 billion won. Even after the share price halved, the company's market capitalization still exceeds 8 trillion won.

The planned listing of Chinese robotics firm Unitree Robotics is also seen as capping the upside for domestic robot stocks, with investors worried it will emerge as a direct competitor to South Korean players.

iM Securities described Rainbow Robotics as a core subsidiary in Samsung Electronics' humanoid robot development but sharply cut its target price from 915,000 won to 650,000 won.

"Rainbow Robotics' corporate value rests on two pillars: its synergy with Samsung Electronics and its status as the only listed humanoid robot company in South Korea," iM Securities said.

Analysts say that for domestic robot stocks to outperform the biotech and semiconductor materials, parts and equipment sectors on Kosdaq, Rainbow Robotics will ultimately need to lead the way higher.