Korea & Company, Uncertainty Over Tender Offer Success... Only Short-Term Trading Prevails

Average Daily Trading Volume of 3.76 Million Shares from the 5th to the 20th
11.8 Times the Previous Month's Average Trading Volume
MBK's Minimum Quantity Condition Not Easy to Meet

Amid a family feud over the management rights of Korea & Company Group, attention is focused on whether MBK Partners will succeed in its tender offer. The outcome is expected to hinge on the participation rate of individual and foreign shareholders in the tender offer. However, M&A experts analyze that it will not be easy for MBK Partners to meet the minimum volume condition they proposed. During this period, individual investors aiming for short-term capital gains are expected to engage in active day trading.

According to the financial investment industry on the 21st, Korea & Company’s average daily trading volume over 12 trading days from the 5th to the previous day was 3.76 million shares. This is 11.8 times higher than the average trading volume of 320,000 shares over the one month from the 6th of last month to the 4th of this month. The average trading value also increased from 4.5 billion KRW to 76.1 billion KRW. As MBK Partners, supporting advisor Cho Hyun-sik of Korea & Company, launched the tender offer, stock price volatility increased and trading volume rose.

Earlier, on the 5th, MBK Partners announced that it would conduct a tender offer for Korea & Company shares through a special purpose company (SPC) named Ventura. They set a minimum purchase volume of 19,315,214 shares (20.35% stake) and a maximum of 25,934,385 shares (27.32%) at a price of 20,000 KRW per share. They attached a condition that if the number of shares tendered is below the minimum purchase volume, they will not proceed with the purchase.

Just before the tender offer news was announced, on the 4th, Korea & Company’s stock price was 16,820 KRW, and the next day it jumped to 21,850 KRW. With expectations that MBK Partners might raise the tender offer price, the stock price remained above 20,000 KRW until the 14th. When it became known that honorary chairman Cho Yang-rae, who supports Chairman Cho, bought 2,583,718 shares (2.72%) of Korea & Company on the market, the stock price fell below the 16,000 KRW level. After MBK Partners raised the tender offer price to 24,000 KRW, the stock price recovered to around 17,000 KRW.

While the stock price was on a rollercoaster ride, individual investors aiming for short-term capital gains flocked in. On the 5th, when Korea & Company’s stock hit the upper limit, individuals sold a net 365,000 shares, but from the 6th, they continued a three-day streak of net buying, purchasing over 1.38 million shares. Their average purchase price was 21,900 KRW, which is nearly 20% below the current stock price, resulting in an unrealized loss. Since then, individuals have repeatedly bought and sold, playing a key role in increasing Korea & Company’s trading volume.

The total number of Korea & Company’s listed shares is about 94.94 million, and excluding the 72 million shares held by Chairman Cho and the owner family, the floating shares amount to 22.94 million. Excluding the 9.4% foreign ownership, the shares held by individuals and other corporations total 14 million. As Chairman Cho’s white knight buys shares on the market, the floating shares continue to decrease.

To meet the minimum volume criteria set by MBK Partners, more than 80% of the shares held by general shareholders such as foreigners and individuals must participate in the tender offer.

Shareholders who recently bought shares and suffered losses due to the stock price decline are likely to respond to the tender offer. Comparing the current stock price of 17,700 KRW with the tender offer price of 24,000 KRW, it is more advantageous to accept the tender offer than to sell on the market. However, judging by recent trading volumes, it is still active, suggesting many investors are buying at low prices aiming for the tender offer and holding on. If more investors hold after buying, a lock-up effect occurs, reducing the floating shares. Even if turnover is active, the overall trading volume will inevitably decrease.

A financial investment industry official said, "Investors who do not see a high possibility of the tender offer succeeding will likely engage in repeated buying and selling to seek short-term capital gains," adding, "Due to the management rights dispute, Korea & Company is attracting attention, and speculative trading appears to be frequent."

From the 5th to the 20th, over 12 trading days, the total trading volume was 45.16 million shares, with a turnover rate (trading volume/floating shares) exceeding 200%. Rapid turnover is occurring within a short period.

MBK Partners set the tender offer period until the 25th. Since the 23rd is a holiday, submissions will only be accepted until 3:30 PM on the 22nd. Shareholders holding shares as of the 20th can respond to the tender offer. Depending on the stock price movement over the next two days, the number of shares tendered may decrease. Investors who bought at relatively low prices after the 15th are likely to sell shares depending on Korea & Company’s stock price movement on the 21st and 22nd. They may judge that it is better to sell on the market and secure profits than to respond to the uncertain tender offer.

Chairman Cho’s side also does not see a high possibility of the tender offer’s success. Korea & Company stated in a press release, "MBK’s tender offer plan includes a condition that if the minimum volume is not met, they will not purchase even a single share," and added, "Investors should be very cautious and prudent." They further said, "The stock price not reaching the tender offer price can be seen as reflecting the market sentiment that does not trust MBK’s tender offer."

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