"Stock Price Down 57.5% After Past Management Dispute"…FSS Investor Warning

Stock Price Overheating Amid Goryeo Zinc Management Dispute
FSS Issues 'Caution' Grade Alert
Governor Lee Bok-hyun "High Concern Over Investor Damage"

Due to the recent management rights dispute between Korea Zinc, Young Poong, and MBK Partners, the stock prices of related companies have overheated, prompting financial supervisory authorities to urge investors to exercise caution on the 8th. The photo shows Chairman Choi Yoon-beom speaking at a Korea Zinc press conference on the 2nd. [Image source=Yonhap News]

Recently, as the stock prices of related companies overheated due to the management rights dispute between Korea Zinc and Youngpoong·MBK Partners, the Financial Supervisory Service (FSS) has urged investors to exercise caution.

On the 8th, the FSS issued a 'Consumer Alert Regarding Tender Offers.' The alert level is 'Caution.'

A tender offer is a system in which shares of a listed company are purchased by soliciting offers to sell from unspecified multiple parties over-the-counter, with the purpose of acquiring corporate control.

The FSS stated, "Recently, competition in the tender offer process to secure management rights of listed companies has overheated, causing stock prices to surge sharply in a short period, and unverified information has circulated, causing confusion among investors."

It added, "There have also been cases where stock prices of related stocks plummeted during or after the tender offer period, so investors need to be cautious. To make rational investment decisions, it is necessary to verify accurate information through tender offer reports disclosed on the Electronic Disclosure System (DART)."

For example, in March last year, when HYBE and Kakao, who were competing for management rights of SM Entertainment, suddenly reached an agreement, the stock price plunged sharply. At that time, the stock price dropped by 23.5% in one day. The current stock price is 67,300 KRW, which is 57.5% lower than the highest price during the dispute (based on closing price) of 158,500 KRW.

There is also a more recent case. In November last year, the stock price of Korea & Company was in the range of 13,000 to 14,000 KRW, but after MBK Partners announced its intention to launch a tender offer, it soared to a high of 22,550 KRW on December 11 of the same year. However, as the possibility of MBK's tender offer failure increased, the stock price plummeted momentarily to around 10,580 KRW. The current stock price remains in the 17,000 KRW range.

Additionally, the FSS emphasized that tax implications should be considered in the case of treasury stock tender offers. When investors respond to a tender offer and gain profits, capital gains tax and securities transaction tax are generally imposed, but in the case of treasury stock tender offers, dividend income tax is incurred.

Investors should also keep in mind the possibility that they may not be able to sell the desired quantity at the tender offer price. If the total number of shares tendered exceeds the target quantity, the tender offeror can only purchase shares proportionally up to the maximum planned purchase quantity.

Furthermore, investors should be aware that the method of tendering may vary depending on the securities company acting as the tender offer agent.

Meanwhile, on the same day, Lee Bok-hyun, Governor of the FSS, publicly pointed out regarding the Korea Zinc tender offer, "Excessive tender offer price competition that disregards long-term corporate value is highly likely to ultimately damage shareholder value," and stated, "there are significant concerns about investor damage related to tender offers." He also ordered active responses, including measures to protect financial consumers.

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