Largest shareholders of publicly traded companies selling shares to raise cash as stock prices rise

Peace Industries-UnionMaterials share price rises… largest shareholder sells some of his holdings

As the stock market continues to move in a range, with individual stocks rising and falling based on issues or themes, there have been a number of cases where the largest shareholders of companies whose stock prices have risen sharply have sold part of their holdings to raise cash. This strategy, which involves disposing of a portion of shares at a level that does not affect management control, is also known as the “largest shareholder’s fortune.

On the 16th, auto parts maker Pyeonghwa Industries announced that its largest shareholder, Pyeonghwa Holdings, sold a portion of its shares on the market. Pyeonghwa Holdings is the largest shareholder with a 47.66% stake in Pyeonghwa, but the sale of more than 550,000 shares reduced its holding to 46.65%.

It is estimated that Pyeonghwa Holdings may have received around 10 billion won in cash as the largest shareholder sold part of its stake while Pyeonghwa’s stock price increased. Analysts believe that Pyeonghwa Holdings’ stock sale is related to the recent surge in Pyeonghwa’s stock price. On the past 16 days, Pyeonghwa’s stock price has been trading between KRW 1,640 and 1,800, the highest level this year. Until the beginning of this year, Pyeonghwa’s stock price was in the 1100 won range, but as the domestic automobile industry has been doing well recently, Pyeonghwa’s stock price has risen significantly. In particular, Pyeonghwa’s stock price has been strong since the middle of this month, and on the 11th, it reached the price limit and exceeded 1,780 won.

Illustration=Jung Down

A similar story can be found in the case of Union Material메이저놀이터, whose stock price has recently surged. Union, the company’s largest shareholder, has sold its stake three times this month alone. On the 4th, 8th, and 16th of this month, Union sold over 410,000, 100,000, and 1.2 million shares of UnionMaterials stock, respectively. As a result, Union’s holding in UnionMinerals has been reduced to 40.0% from 44.07%.

UnionMaterials shares have been trading in a range of 2,000 to 3,000 won over the past year, but have risen significantly since last month. In April, the stock price rose into the 4,000 won range, and this month it exceeded 6,000 won. On April 4, when Union sold its first shares this month, the intraday price was close to 8,000 won. Recently, ferrite has gained attention in the stock market as a rare earth substitute for secondary batteries, and Union Material, which produces ferrite magnets, has been bundled into related theme stocks, attracting investment funds.

In the case of Hannong Chemical, a stock related to all-solid-state batteries, Chairman Kim Eung-sang sold part of his stake as the stock price rose. Mr. Kim sold 100,000 of his shares on March 26, after the stock rose from around 20,000 won to around 30,000 won last month. Hannong Chemical’s stock price has been hovering around 10,000 won for the past year, but it surpassed 20,000 won last month.

The common thread in cases where the largest shareholder sells a portion of its holdings after a stock price spike is that even if the sale reduces its stake somewhat, it is not enough to affect control. In the case of Hannong Chemical, where Kim is the largest shareholder, related parties, including Kim, hold a 46 percent stake.

“If the largest shareholder disposes of some of its shares when the stock price surges unusually high, it can get the cash it needs, and it has the advantage of expanding its stake at a lower price when the stock price drops later,” said a securities industry insider. “If it is not enough to shock the stock price, it can be seen as a healthy transaction by the largest shareholder.”

However, some voiced caution that selling excessive stakes when stock prices are rising could send the wrong signals to shareholders and investors and raise questions about the moral responsibility of the largest shareholders. “There is no reason for the largest shareholders to sell their stakes, even if it is a small portion, from the perspective of minority shareholders,” said an official from a KOSDAQ company.

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