What’s Next for SK Biopharm After Lock-Up Release in the New Year?

Release of Mandatory Holding for About Half of Total IPO Shares
Most Price Drops Due to Profit-Taking Sales So Far
Major Shareholders' Sales May Be Limited... Continued Losses Also a Factor

On the morning of July 2nd last year, a ceremony commemorating SK Biopharm's listing on the Korea Exchange's KOSPI market was held at the Korea Exchange Seoul building.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] SK Biopharm, which led the IPO frenzy last year, is drawing attention with its stock price in the first week of the new year. This is because the lock-up (mandatory holding) period for shares held by the holding company SK expired on the 1st, potentially triggering a flood of profit-taking sales. Since the stock price generally fell when previous lock-up periods expired last year, concerns about a sharp decline are emerging again. However, as these shares are held by the holding company, it is also expected that there will not be many profit-taking sales in order to maintain control.

According to the Financial Supervisory Service's electronic disclosure system on the 4th, SK Biopharm announced that the mandatory holding period for 58,734,940 common shares (75%) held by its largest shareholder SK expired on the 1st of this month. Mandatory holding is a system that prohibits major shareholders and underwriters from selling shares for a certain period based on regulations by the Financial Services Commission on securities issuance and disclosure, as well as listing rules of the Korea Exchange. This is to protect small investors from sharp stock price drops caused by major shareholders selling their shares. Since the implementation of the electronic securities system on September 16 last year, the term changed from 'mandatory lock-up' to 'mandatory holding.'

SK Biopharm, which sparked the IPO frenzy aiming for profit-taking immediately after listing last year, had mandatory holding applied to about half of the total IPO shares of 19,578,310, specifically 9,351,728 shares. Each time the mandatory holding period was lifted, the stock price mostly declined. On July 17, when the lock-up period expired for the first time, the stock price closed at 191,000 KRW, up 4.09% from the previous day. Since the volume of shares released from mandatory holding was only 13,700 shares, it is interpreted that profit-taking had little impact on the overall stock price.

From one month after listing, profit-taking sales began in earnest. On August 3 last year, when 262,500 shares were released from mandatory holding, the stock price closed down 3.85% from the previous day. On October 5, when 1,705,534 shares were released from mandatory holding, the stock price plunged 10.22% to 140,500 KRW from the previous day. Since the volume of shares released on that day was the largest ever, concerns about a stock price decline are growing.

However, since these shares are held by the holding company, it is expected that profit-taking sales may be fewer than anticipated to maintain control. It is analyzed that the possibility of choosing profit-taking is low as the stock price has continued to decline, being left out even during the rising market at the end of last year. In December last year, the KOSPI rose 23.8%, but SK Biopharm’s stock price fell 4.8% during the same period, closing at 169,000 KRW. This contrasts with the immediate post-listing period when it recorded a 'ttasang-sang' (opening price at double the IPO price followed by two consecutive days of upper limit price) and soared to 269,500 KRW on July 7 last year. Given the poor earnings outlook, it is expected that immediate profit-taking will not be pursued. Eugene Investment & Securities forecasted that SK Biopharm would record an operating loss of 248.4 billion KRW last year. They expect the company to continue posting losses due to pipeline investments until 2023 and turn profitable only in 2024.

This content was produced with the assistance of AI translation services.