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Are chaebol owners making use of stock plunge for succession plans?

(Yonhap)
(Yonhap)

Owners of large South Korean conglomerates have been buying their low-priced shares amid the stock plunge caused by the coronavirus pandemic, raising questions as to whether they are taking advantage of the situation for their succession plans.

Over the past two months, Korean stocks have tumbled and major firms have lost their market value by a third. Amid the stock market crash, the repurchase of treasury stocks has been on the rise. The cumulative spending on treasury stocks amounted to around 1.4 trillion won ($1.1 billion) this year until Friday last week, up more than 2.5 times on-year, according to the Korea Exchange on Monday.

On Monday last week, CJ Group Chairman Lee Jay-hyun canceled the donation of CJ Corp. shares he had given to his two children late last year. He then redonated them on Wednesday.

The decision was “inevitably” made as the holding firm’s stock prices plunged, the group explained. At the current stock price level, “the total price of donated shares and gift tax on them are similar.” Canceling a donation is allowed by law within three months.

The value of the shares Lee had given to his two children was 65,400 won per share as of Dec. 9 last year. The stock was valued at 41,650 won a day before Lee redonated the shares, down 36.3 percent during the period.

Other family members of major groups were also seen purchasing the low-priced shares.

The owner family of Hyosung Group bought stake in Hyosung Corp. worth about 300 million won after the firm’s stock price plunged following the coronavirus outbreak.

On Tuesday last week, Hyosung Group Chairman Cho Hyun-joon and his family bought 6,100 shares of Hyosung’s common stocks in the market. His eldest daughter In-young, 17, and his second daughter In-seo, each bought 1,310 shares and his son Jae-hyun bought 870 shares. Upon the purchase, the owner family’s combined stake rose slightly to 55.11 percent from 55.08 percent.

The two children of Park Yong-hak, who is a senior executive of Sempio Foods and a son of Sempio Group Chairman Park Jin-sun, bought 11,195 shares of holding firm Sempio Corp.’s stock in the market last week. Park gave cash to his two children -- born in 2012 and 2016 -- and they purchased the stocks. Sempio’s shares fell more than 10 percent in March from the previous month.

The fourth generation of owner families, whose succession seems to be imminent, are also speeding up their stake purchases.

Early last month, GS Caltex CEO Hur Sae-hong, who is the son of Chairman Hur dong-soo, bought 34,133 shares of GS Holdings’ common stocks in the market. This year alone, he has spent a total of 20 billion won to purchase the shares, with his stake rising to 2.28 percent from 1.51 percent at the end of last year.

Hyundai Motor Group Executive Vice Chairman Chung Euisun bought around 81 billion won worth of Hyundai Motor and Hyundai Mobis shares last month. Their share price was cut in half in the aftermath of the coronavirus pandemic. This was the first time since 2015 that Chung has bought Hyundai Motor shares.

Koo Dong-hwi, a senior executive of LS Corp. and son of LS Group Chairman Koo Ja-yeol, also bought 7,600 shares of LS Corp.’s common stocks in March.

“The coronavirus-led stock plunge can send a bad signal to the management and shareholders. But, it benefits owner families by enabling them to purchase low-priced shares and save gift tax for future succession,” said Park Ju-geun, head of corporate watchdog CEOScore.

By Shin Ji-hye (shinjh@heraldcorp.com)
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