April 20, 2024

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[THE INVESTOR] A demand from Celltrion's minority shareholders to move the company’s stock to the benchmark KOSPI market from the secondary KOSDAQ is expected to have a limited impact on restraining short selling that has been creating sharp volatility in its share price, industry experts said on Aug. 9.

Celltrion, a Korean biosimilar maker and the most valuable stock on the KOSDAQ, has received thousands of petitions signed by its minority shareholders requesting an extraordinary general meeting to discuss its relisting on KOSPI. 

The shareholders have asserted that the transfer to KOSPI would help protect investors from short sellers who makes make money if the stock price declines.

Celltrion is the largest KOSDAQ-listed firm with a market capitalization of 13 trillion won (US$11.40 billion) on par with KOSPI’s No. 26 stock LG with 13.1 trillion won.

While Celltrion said it would review the shareholders request, some experts are skeptical on the move as a way to avoid short sellers.

“The transfer will not decrease negative bets placed against the company as bigger volume of short selling transactions have taken place on the KOSPI,“ said an official at Korea Exchange, the country’s bourse operator.

The short-selling transactions amounted to 50 billion won on KOSDAQ, while on KOSPI they reached 350 billion won in the last three months, according to the official.

Celltrion has been the target for short sellers since 2012 when the company had requested an investigation into abusive short selling practices. The financial authorities concluded that there was no systematic move to reduce stock prices in short selling.

Experts agree on the positive impact on supply-demand conditions when the stock moves to the first-tier bourse as it could attract fresh demand from investors who prefer stable returns on safe stocks and offer broader exposure to institutional investors.

But more exposure to them could also mean the higher possibility of being a target of short selling, which institutional and foreign investors often use as their stock trading strategy.

“Celltrion could be included to long-short funds related short selling if the stock moves to KOSPI which has stronger trading by institutional and foreign investors,” an investment banking official said.

In April, Kakao, the operator of mobile messenger KakaoTalk was relisted on KOSPI, after delisting KOSDAQ in hopes of enhanced investments from offshore investors.

Other KOSDAQ heavyweights which have shifted include web portal operator Naver, the second-largest air carrier Asiana Airlines, travel agency Hanatour Service and mobile carrier LG Uplus.

By Park Han-na (hnpark@heraldcorp.com)