[Edaily Reporter Shin Ha-yeon ] HANJINKAL’s stock price has risen nearly 50% this month amid growing speculation about a potential stake battle between HANJIN Logistics Corporation Chairman Walter Cho and Hoban Group. In the past, stocks involved in management control disputes have surged on expectations of additional purchases or increased tender offers, only to give up those gains before the dispute ended as the acquisition competition weakened or concerns about dilution of existing shareholders’ stakes grew. Consequently, whether the moves by both sides to expand their stakes will actually lead to follow-up purchases is seen as a key variable for HANJINKAL’s stock price.

According to the Korea Exchange on the 4th, HANJINKAL(180640)closed at 184,300 won, up 5.19% from the previous trading day. The previous day, it closed at 175,200 won, up 40,400 won (29.97%), having hit the daily price limit. Considering that the closing price at the end of last month was 123,900 won, this represents a 49.15% increase this month alone. The preferred stock, HANJINKAL(1P)(18064K), surged by 30.00% and 22.44% on the previous day and today, respectively, marking a sharp rise over the past two days.

◇Soared amid takeover battle fervor… Plunged over 20% in a single day as the competitive landscape shifted

The stock price was driven by speculation that the structure of the largest shareholders could change. Ho-Ban Group recently purchased additional HANJINKAL shares on the open market and, anticipating the possibility of becoming the largest shareholder, applied to the Fair Trade Commission for a merger review. Ho-Ban Group’s stake, disclosed last July, stood at 20.15%, with a gap of 0.42 percentage points from the combined stake held by Chairman Cho and his affiliates (20.57%).

Chairman Cho also disclosed on the 2nd that he had signed a contract to purchase 325,000 shares of HANJINKAL common stock at 114,000 won per share. The total transaction value is 37.05 billion won; once the transaction is completed, Chairman Cho’s personal stake—based on the total number of issued shares, including preferred stock—will rise from 5.75% to 6.23%. The ownership stake, including that of related parties, will increase from 20.57% to 21.06%. Although the stated purpose of the transaction was to “strengthen responsible management,” it is interpreted as a move to effectively counter the Ho-Ban Group’s expansion of its stake.

Typically, when a battle for control erupts, stock prices surge as investors anticipate that both sides may buy more shares or raise the tender offer price. How long the stock price continues to rise depends on whether expectations for subsequent purchases are sustained. Looking at past examples, SM ENTERTAINMENT CO., Ltd. and HANKOOK & COMPANY saw their stock prices plummet by more than 20% in a single day when the competitive landscape shifted, even though their tender offer periods were still ongoing.

SM ENTERTAINMENT CO., Ltd.(041510)The stock price rose 60.9% in one month, from 98,500 won on February 9, 2023—when the acquisition battle between HYBE and Kakao was underway—to 158,500 won on March 8. Kakao’s tender offer price had exceeded 150,000 won. However, on March 13—the first trading day after HYBE announced it was suspending its acquisition process—the stock price plummeted 23.48% in a single day. Although Kakao’s tender offer continued, the stock price fell significantly below the offer price once one of the two competing companies withdrew.

The stock price also reacted immediately to news that the likelihood of one side defending its management control had increased. In December of the same year, HANKOOK & COMPANY(000240), as MBK Partners and Advisor Cho Hyun-sik launched a tender offer, news emerged that Honorary Chairman Yang-Rae Cho had purchased a 2.72% stake on the open market, bolstering the position of Chairman Cho Hyun-beom’s camp. Consequently, the stock price closed at 15,850 won on December 15, down 25.06% for the day.

When MBK raised the tender offer price from 20,000 won to 24,000 won after the market closed on the 15th, HANKOOK & COMPANY rebounded to the intraday price limit of 20,600 won on the following trading day, the 18th. However, the closing price settled at 17,700 won, and on the 22nd—the effective deadline for accepting the tender offer—it stood at 16,380 won, falling below the closing price immediately prior to the tender offer (16,820 won). Although the tender offer price hike brought back buying momentum, the rebound was short-lived as the likelihood of a management defense increased.

◇Gains Given Up Even as Dispute Drags On… “Caution Advised on Chasing the Market”

KoreaZinc and KOLMAR HOLDINGS are examples of companies whose stock prices fell even as disputes continued. KoreaZinc(010130)The stock price of KoreaZinc surged 177.5% in about a month and a half, rising from 556,000 won on September 12, 2024—just before Youngpoong and MBK launched their tender offer—to 1,543,000 won on October 29. However, the next day, following the announcement of a large-scale public offering, the stock closed at the daily limit down of 1,081,000 won, a 29.94% drop. As the battle for control continued, market attention shifted from the competition to secure stakes to concerns over the dilution of existing shareholders’ stakes resulting from the issuance of new shares.

KOLMAR HOLDINGS(024720)The correction lasted several months. As the sibling conflict over the restructuring of KolmarBNH Co., Ltd’s board of directors escalated into a lawsuit between father and son over the return of shares, the stock price—which had risen to the 18,000 won range in late June of last year—fell to 12,480 won in early October, a decline of approximately 30% from its peak. Chairman Yoon Dong-han withdrew the lawsuit in May of this year, and the stock price had already given up its gains several months before the legal dispute was resolved.

At HANJINKAL, the key question is whether this change in shareholdings will actually lead to follow-up purchases. Variables include the exact stake held by Hoban Group, its plans for additional purchases, and the moves of major shareholders such as the Korea Development Bank. In particular, since only about 20% of HANJINKAL’s shares are actually in free float, some analysts suggest that the stock price could fluctuate significantly depending on trading by major shareholders.

Bae Se-ho, an analyst at iM Securities, noted, “The fact that the potential for a management control dispute is being factored in, combined with the reality that the actual volume of freely tradable shares is only around 20%, could be reflected in a premium that far exceeds the company’s intrinsic value.” He added, “Since it is currently unclear when or how the Korea Development Bank will sell its stake, if the Hoban Group is pursuing control of HANJINKAL, it is likely taking a very long-term view.”

Experts advise that before rushing to buy stocks that have surged on expectations of a stake battle, investors should examine the actual likelihood of additional purchases and the impact that changes in corporate governance would have on the company’s value. Lee Hyo-seop, a research fellow at the Korea Capital Market Institute, pointed out, “In cases where stock prices have risen sharply in the short term due to management control disputes related to mergers and acquisitions (M&A), it has been observed in most instances that prices tend to converge back toward the company’s intrinsic value; therefore, it is very risky for retail investors to chase the rally in anticipation of further gains.”