Insider Trading Shifted to Stocks... POSCO Plummets After Employee Prosecution by Prosecutors (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Sixty-four POSCO executives, including Chairman Choi Jung-woo, were reported to the prosecution last year in March for bulk purchasing of the company's shares. The suspicion is that the company used undisclosed information for stock investment ahead of the announcement of a favorable stock market disclosure regarding the company's share buyback. The company stated that the executives bought shares at a low price amid the sharp plunge in the domestic stock market due to COVID-19 at the time, but the stock price, which soared recently due to steel price hikes, has been sharply falling on the 9th.

Civic groups such as People’s Solidarity for Participatory Democracy, the Metal Workers’ Union, and the Minbyun Civil Economy Committee held a press conference in front of the Seoul Central District Prosecutors' Office on the morning of the same day and announced that they had reported 64 POSCO executives, including Chairman Choi, to the prosecution for violating the 'Capital Markets and Financial Investment Services Act.'

According to People’s Solidarity for Participatory Democracy, Vice President Jeon of POSCO started purchasing 1,000 shares of POSCO stock on March 12 last year, followed by Finance Director Lim buying 300 shares the next day. Then, on March 17, Chairman Choi Jung-woo bought 615 shares, and on the 18th, President Jang In-hwa purchased 500 shares. In total, 64 executives bought company shares until March 31 last year. Subsequently, POSCO held a board meeting on April 10 last year and decided on a one-year share buyback plan worth 1 trillion won.

People’s Solidarity for Participatory Democracy pointed out, "Vice President Jeon is in charge of POSCO’s Strategic Planning Headquarters, and Finance Director Lim is known to have overseen the practical work related to the share buyback case. Not only did the 64 executives systematically purchase company shares during a specific period, but the purchase quantities were also similar, around 100 to 300 shares, as if pre-arranged, which reasonably suggests that they received the same information in advance."

Some argue that the concentrated purchase of POSCO shares by executives in March last year was likely a low-price buy due to the stock market crash caused by the COVID-19 pandemic. POSCO also stated, "As the company’s stock price plummeted due to the COVID-19 pandemic, the accused executives voluntarily purchased company shares to demonstrate responsible management."

In a statement released on the same day, POSCO expressed "deep regret" over the accusations by some groups such as Minbyun against POSCO executives for violating the Capital Markets Act, explaining that "the executives voluntarily purchased shares to show responsible management to the market as the stock price fell by up to 42% compared to the beginning of the year." It added, "Long-term institutional investors continuously requested share buybacks to resolve undervaluation, and due to excessive stock price decline, the matter was urgently submitted to an extraordinary board meeting on April 10 and finally decided."

However, People’s Solidarity for Participatory Democracy argued, "While it is true that company executives sometimes purchase shares for responsible management, they do not buy company shares right before a favorable company disclosure as the accused did. Since a favorable disclosure was about to be announced, they purchased shares without any economic risk, which constitutes trading using undisclosed internal information."

POSCO’s stock price, which was sluggish at the beginning of the year, surged significantly from last month when steel price hikes began in earnest. With expectations that economic normalization would positively impact the company’s performance, the stock rose 30.96% from the 29th of last month to the day before. During the same period, foreigners purchased over 1 trillion won worth of shares, ranking POSCO third among net foreign purchase stocks.

However, POSCO, which started trading with an upward trend on the day, sharply fell after the prosecution report by People’s Solidarity for Participatory Democracy, closing at 317,000 won, down 1.40% (4,500 won) from the previous day.

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