Why Did Jo Seok-rae, Honorary Chairman of Hyosung Who Stepped Down from Management, Purchase 20 Billion Won Worth of Company Shares?

From February to this month, holding company Hyosung Co., Ltd.
Hyosung Advanced Materials, Hyosung TNC, Hyosung Chemical, etc.
Purchased a total of 118,747 shares on the market

Honorary Chairman Cho Seok-rae of Hyosung Group (left) and Chairman Cho Hyun-joon. Photo by Hyosung

[Asia Economy Reporter Choi Seoyoon] Cho Seok-rae, Honorary Chairman of Hyosung who stepped down from frontline management in 2017, has been drawing attention as he consecutively purchased shares of the group’s holding company Hyosung Corporation and its affiliates.

According to the Financial Supervisory Service on the 15th, Honorary Chairman Cho invested about 20 billion KRW from February to the 14th of this year to purchase a total of 118,747 shares of Hyosung Corporation and its affiliates (Hyosung Advanced Materials, Hyosung TNC, Hyosung Chemical) on the market. This is the first time in about four and a half years since July 2017, before Hyosung Corporation transitioned to a holding company, that Cho has bought back company shares.

Looking at each company, Honorary Chairman Cho purchased 71,010 common shares of Hyosung Corporation in 53 transactions from February 4 to the 9th of this month, spending about 5.5 billion KRW. Except for March and August this year, he consistently bought shares every month, ranging from 4 trading days to as many as 16 consecutive trading days.

He also purchased 6,070 common shares of Hyosung Advanced Materials in 23 transactions from February to this month for about 2.3 billion KRW, and 25,289 shares of Hyosung TNC in 67 transactions during the same period for about 9.3 billion KRW. For Hyosung Chemical, he started buying in May and acquired a total of 16,378 shares in 50 transactions by this month, spending about 2.8 billion KRW.

In the market, share buybacks by owners or management are often interpreted as a signal of a bottom-fishing opportunity. Although the stock price does not necessarily rise just because the largest shareholder or their related parties buy shares, the commonality is that they have used personal funds to purchase shares when the stock price is perceived to be low.

However, the prices of the shares acquired by Honorary Chairman Cho this year have actually fallen compared to the purchase points. The stock price of Hyosung Chemical has dropped 40.6% from the time of his purchase to the present, while Hyosung TNC and Hyosung Advanced Materials have fallen 17.4% and 13.8%, respectively. Hyosung Corporation’s stock price declined 9.9% during the same period.

As his stake increases, there is an effect of increased dividends. Honorary Chairman Cho earned over 35 billion KRW from dividends alone last year. However, at 87 years old this year, it is unlikely that he will return to management, and there is no clear need or use for accumulating cash. Since he has not succeeded in defending the stock price, the timing and scale of his purchases have raised questions both inside and outside the industry.

Some speculate that this may be a preparatory move ahead of future share transfers. An industry insider said, “Cash has almost no value fluctuation, so its utility is low. On the other hand, shares can fluctuate in value depending on the stock price, so this could be an attempt to transfer shares later when the stock price falls.” Typically, owners try to minimize taxes by transferring shares when the stock price is low during succession.

It is also noteworthy that Lee Mi-kyung, wife of Chairman Cho who previously held no shares in Hyosung Corporation, has started purchasing shares this year. Beginning with 340 common shares bought on the market in June, she secured 900 shares over nine transactions. Chairman Cho’s eldest daughter, second daughter, and son have also been steadily buying small amounts of Hyosung Corporation shares.

Although the scale of share purchases is not large, the fact that Chairman Cho’s family members are buying shares carries significant symbolism. If close associates increase their stakes, it can be used as a device to defend management rights. Chairman Cho is the largest shareholder with 21.94% of Hyosung Corporation shares, and the gap with his younger brother, Vice Chairman Cho Hyun-sang (21.42%), is minimal. Therefore, there is speculation that Honorary Chairman Cho, who holds 9.76% of Hyosung Corporation shares, could play a casting vote role.

A Hyosung Group official said, “The purchases were made to enhance shareholder value, such as defending the stock price,” cautioning against overinterpretation.

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