GL Chemical (2)
Go Jaeik, the CEO of GL Chemical, looked into Han Miru's background.
He already knew the broad strokes, but the deeper he dug, the more astonishing it became.
Back when Miru was a rookie at DA Securities, he had exposed the Primus Fund scandal and brought down Executive Director Yang Jeong-uk. Then, during the Thomas Motors debacle, he warned Heo Min-woong in advance and helped him sell out before the crash. Thanks to that, Heo Min-woong had surged ahead as Hur Min-hong's rival. Some people were even predicting that he might one day edge past his older brother and inherit Hwaan Group.
And then there was the three-way alliance he had built, which drove the controlling family out at the shareholders' meeting and dismantled Hanjeong Group.
Three conglomerates. Three destinies overturned by Han Miru alone.
So what about GL Group?
'GL Group is nothing like Hanjeong Group.'
Its market cap was several times larger, and it had already completed its transition into a holding company, leaving the controlling family's grip firm and stable. It was not the kind of structure that could be shaken by an outside attack.
That didn't mean he could relax.
Go Jaeik focused on the remarks Han Miru had made at his daughter's birthday party.
Miru had fiercely denounced any act that harmed shareholders, and had pointedly brought up the physical spin-off and listing of GL Entech.
'Could he be trying to block the GL Entech IPO?'
Just as he was watching the situation closely, some opposition lawmaker raised an issue with the GL Entech listing.
Namgoong Seok, a lawmaker from the Our People's Party.
Even after his party tried to rein him in, he kept raising his voice.
Go Jaeik sensed that something was off.
Namgoong Seok had never said a word about this before. If he truly believed there was a problem, he would have spoken up at the time of the physical spin-off.
'Did Han Miru move behind the scenes?'
But if that was true, why was Miru trying to stop the GL Entech listing?
Out of a sense of justice?
Impossible.
'Is he trying to kill the IPO so he can profit by buying GL Chemical on the dip?'
Go Jaeik kept a close eye on the market.
Buy orders remained steady, but short selling started flooding in instead.
The sell volume crept upward little by little, and before long GL Chemical had climbed to the number-one spot for short volume.
Go Jaeik received a report from one of his staff.
"Foreign institutions are unloading shares in huge quantities. We're still trying to confirm exactly which ones."
He didn't even need to confirm it to have a pretty good idea who it was.
His mind was in turmoil.
'Then Namgoong Seok has nothing to do with Han Miru? What on earth is Continue Capital after, then?'
Then the WST article came out.
The moment he saw it, Go Jaeik understood the other side's objective with perfect clarity.
"They dragged in a lawmaker to publicize the problems with the GL Entech IPO, while they themselves plan to make money shorting GL Chemical."
He had already prepared countermeasures for a number of possible scenarios.
He immediately issued orders.
"Flood the media with ads at once, and get article requests out."
The impact of the WST article was enormous.
Most retail investors didn't even really understand what a physical spin-off was, let alone why a company would list the spun-off entity again.
Management had told everyone that if the battery business got its proper valuation through the GL Entech IPO, GL Chemical's stock would rise too, and everyone had simply taken that at face value.
But then Continue Capital suddenly declared that it was a major negative and announced a short position.
There were plenty of hedge funds out there that made a living shorting stocks while spraying out reports and articles, but if the hedge fund in question was Continue Capital, that was a different matter entirely.
Up to this point, Continue Capital had never been wrong.
When they said Blackwood Hotel would plunge, it plunged. When they said it would soar, it soared. Not long ago, they had even exposed the rigging of random box probabilities and cut the market cap of LD Studio, Korea's largest game company, in half.
This time, they announced a short sale and set a target price of 400,000 won for GL Chemical. Based on the current share price, that meant they were predicting a 60 percent collapse.
GL Chemical's stock, which hadn't budged even when Namgoong Seok raised the issue, fell nearly 20 percent in just one day after the WST piece ran, dropping to 830,000 won.
GL Chemical's shareholders were stunned.
GL Chemical hit back aggressively with press releases, and the media outlets that fed on conglomerate advertising mostly carried GL Group's side of the story.
'The talk of a holding-company discount and double counting is nothing but speculation. It's just a malicious move by a hedge fund trying to profit from pushing the stock down. Listing GL Entech will improve the company's valuation and help the stock rise. The company will respond forcefully to protect shareholders.'
Whether it worked or not, it did put a brake on the drop.
Senior Dongho said, "They're throwing everything they have into media play on that side. Shouldn't we do something too?"
"We should."
As expected, once Continue Capital declared a short position, the issue drew a certain amount of public attention. Thanks to that, Namgoong Seok was also getting noticed.
But it still wasn't enough.
If we were going to open the board at all, we should make it as big as possible.
"Let's do some media play of our own."
"How?"
"Go on the news and explain to the entire country why GL Chemical is bound to crash."
At my words, Senior Dongho suddenly put on a grave expression.
"Hmph. I suppose it can't be helped. So it's finally my time to step up?"
I stared at him, dumbfounded.
"Why would you step up?"
"Huh? Weren't you telling me to go on air?"
"No. What kind of guy can't even handle a group presentation and somehow thinks he belongs on TV? Have you forgotten that because of you, our whole team got B's in basic statistics?"
Senior Dongho looked properly shocked.
"What? That was because of me? I thought it was because of you all along."
"…"
Watching him shove the blame around like that, I felt like he'd make a decent politician someday.
"Then if not me, who else is going?"
There was someone in our company who was perfectly suited for this.
I turned to Kim Beom-seok.
"How about appearing on the news as Continue Capital's representative?"
"Me? On the news?"
"You've done a lot of broadcast work, so you're used to cameras, right?"
"I've only ever gone on music programs…"
"You're standing in front of a camera either way, so isn't it basically the same?"
"I-is it?"
Kim Beom-seok looked far from confident.
I pointed at Senior Dongho.
"Otherwise, we'll have to send this senior out live on air."
With that, he nodded as though he had no choice.
"I'll just go."
Senior Dongho clapped his hands.
"Ah! So this is why you got him into singing."
"No, that wasn't the reason at all…"
"Sure, sure. No need to use a butcher's cleaver to kill a chicken, right? Just send him out."
What was this guy talking about? He looked like he couldn't even catch a chick.
Senior Dongho patted his friend's shoulder.
"You go on, broadcaster."
"…"
TJBS 8 o'clock news.
It wasn't a terrestrial network but a cable news channel, yet thanks to star anchor Park Younggi, it had the highest ratings among the cable news broadcasts.
The biggest issue in the economy recently was the GL Entech listing question.
Unlike other outlets, which mostly covered GL Chemical's position, TJBS took a comparatively neutral stance.
When Kim Beom-seok said he would appear on the program for that issue, the production team immediately arranged a special interview.
As the news was nearing its end, anchor Park Younggi said, "Tonight we have a guest who's truly difficult to invite onto a set. Singer and fund manager Kim Beom-seok."
As the camera turned, Kim Beom-seok bowed his head in greeting.
"Hello. I'm Kim Beom-seok."
Anchor Park Younggi spoke to him warmly.
"It's a pleasure. I really enjoy your songs."
"Thank you."
"A lot of viewers probably know you only as a singer, Mr. Kim Beom-seok. Before you returned to music this time, I heard you were working at an investment firm?"
"That's right. I'm currently working as a fund manager at a private equity fund called Continue Capital."
"If you don't mind my asking, which do you consider your main job: singer or fund manager?"
"I'd say both are my main job. Think of it the same way you'd think of a singer acting, or a chef or athlete appearing on variety shows."
"I see. Still, doesn't it get hard to keep singing while working at a private equity fund?"
"The company does its best to accommodate me, so it's not a major problem. I just don't get as much rest as I'd like."
"That sounds like a really good company. I'm jealous."
After lightening the mood with a bit of banter, Park Younggi moved on to the real questions.
"I have a lot I want to ask about your music career, but since you're here today as an employee of Continue Capital, I'll ask a few questions related to that. Continue Capital recently announced a short position in GL Chemical, which has become a hot topic. Why is that?"
"GL Chemical is definitely a good company. If it weren't for the GL Entech listing issue, I would have recommended buying it. But if GL Entech goes public, there is a risk that the stock will fall sharply because of the double counting problem."
"I've read about it in articles, but I don't really understand exactly what a holding-company discount or double counting is, or why they're considered such a problem. Could you briefly explain it for viewers who also find it hard to understand?"
Kim Beom-seok began his explanation calmly.
"Certainly. Let me give you an example. Suppose there are two companies, A and B, each with a market cap of 20 billion won. Let's say A acquires 50 percent of B's shares. What would A's market cap be then?"
Anchor Park thought for a moment, then answered, "Would it become 30 billion won, adding B's half-value of 10 billion won to A's original 20 billion?"
"That's right. But if B also acquires 50 percent of A's shares, what would B's value be?"
This time, Park answered without hesitation, as if there was no need to think about it.
"It would be 30 billion won as well. Since you'd add 10 billion won, half of A's value, to the original 20 billion."
Kim Beom-seok shook his head.
"No. It becomes 35 billion won."
Anchor Park looked confused.
"Why is that?"
"Didn't you just say A's value was 30 billion won? Then B should be 20 billion plus 15 billion, which is half of A's value, for a total of 35 billion."
Anchor Park put on a deliberately shocked expression.
"Ah... I see."
"But if B becomes 35 billion, then A now has to be 37.5 billion."
"Then wouldn't B have to be 38.75 billion next?"
"Exactly. Two companies with market caps of 20 billion won each simply hold 50 percent of each other's shares, but if you double count that, the values keep ballooning infinitely. That's the double counting problem."
"Ah! I get it now."
"Of course, this doesn't actually happen in reality. Investors don't fully value the shares A and B hold in one another."
Anchor Park kept asking questions.
"But GL Chemical is denying the holding-company discount and double counting issues, isn't it? For example, if one company holds 1 trillion won worth of another company's stock, then it's worth 1 trillion won. Why arbitrarily calculate it at half that? What do you think about that?"
"GL Chemical's claim can be easily refuted by looking at the GL Group situation."
"What do you mean?"
"Let's take a look at GL, the holding company of GL Group. Excluding its 2 trillion won in cash and real estate assets, GL also holds a 34 percent stake in GL Chemical, as well as 35 trillion won worth of shares in affiliates like GL Electronics and GL Cosmetics. And yet GL's market cap is only 13 trillion won. If GL Chemical's claim were right, that alone wouldn't make sense, would it?"
"Now that you put it that way, it doesn't."
With his usual calm voice, Kim Beom-seok delivered the cutting blow.
"If GL Group's holding company stock looks like this right now and yet they say there's no reason to worry about a holding-company discount or double counting, then there are only two possibilities. They're either lying even though they know better, or they're deceiving their shareholders."