[Inside Chodong] Yangjisa's Lack of Communication Exacerbates Problems

The KOSDAQ index has fallen by 35% since the beginning of this year. The index, which was above the 1000 mark at the end of last year, has plummeted below the 670 level. A considerable number of KOSDAQ-listed companies are making every effort to prevent further decline in shareholder value. They are considering shareholder-friendly policies such as share buybacks and cash dividends, and employees are also purchasing company shares. Through investor relations (IR) activities, they are actively promoting their growth strategies and strengths.

On the other hand, Yangjisa, whose stock price has risen 370% this year, has consistently responded with "no comment" to inquiries about the reasons for the sharp price increase. It appears to be a cautious approach, concerned that even without active IR, the stock price is rising, and that premature communication with investors could lead to controversy.

Yangjisa began attracting attention on July 21 when individual investor Kim Daeyong disclosed acquiring more than 5% of the shares. Mr. Kim explained that the purpose of holding the shares was to propose shareholder initiatives aimed at enhancing shareholder value, such as a bonus issue and voluntary delisting. Over four days starting July 18, he purchased Yangjisa shares, investing over 10 billion KRW. On the day of the 5% acquisition disclosure, Yangjisa’s stock price surged 20%. Flustered by the excessive attention, Mr. Kim reversed his statement the next day through a correction disclosure, saying it was a simple investment to avoid market misunderstandings.

Following the emergence of this "super ant" investor, Yangjisa’s stock price began a significant upward trend from August 10. It was revealed that the circulating shares accounted for only 10% of the total shares, making it a "scarce stock" unaffected by the domestic stock market. The stock price, which had hovered around 10,000 KRW, surpassed 50,000 KRW within two months. Looking at Yangjisa’s shareholder composition, founder Honorary Chairman Lee Baegu and his sons Lee Jin and Lee Hyun hold 75.53%. Including 14.04% of treasury shares held, the circulating shares amount to only 10%. About half of these circulating shares have been acquired by the super ant investor Mr. Kim, so the amount of Yangjisa shares circulating in the KOSDAQ market recently is less than 800,000 shares. On August 7 and 11, Yangjisa’s trading volumes reached 3.96 million and 3.15 million shares, respectively?4 to 5 times the circulating volume.

Yangjisa, a company with a fiscal year ending in June, submitted its business report on July 28. For the 43rd fiscal year, from July last year to June this year, Yangjisa recorded sales of 44.9 billion KRW, an operating loss of 600 million KRW, and a net loss of 4.1 billion KRW. Compared to the previous year, sales were similar, but the operating loss was reduced. Net income turned negative.

Considering the trading volume, the speed of the stock price increase, and the degree of performance improvement, it is difficult to deny that an overheating trend is continuing. Since July 19, the company has stated that there is no important information to disclose regarding market fluctuations and has not issued any further statements. In a situation where the stock price has already surged, decisions such as selling treasury shares or stock splits to increase the number of circulating shares could affect the stock price. Whether the stock price rises or falls, problems may arise. Even considering practical issues, if the company continues to remain unresponsive, the same situation could recur.

It is problematic to fail to fix the barn after losing the cow. If the low number of circulating shares leaves the stock vulnerable to speculative forces, the company should consider increasing the number of shares in communication with the market. There are many available methods, such as using treasury shares to raise investment funds for growth, stock splits, or stock dividends. The sharp rise in the stock price has increased awareness of Yangjisa. If handled wisely and leading to an improved image, it could increase preference for Yangjisa’s products. Avoiding responsibility is not the best approach.

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