GL Chemical (6)
A vicious political battle broke out over the GL Entech listing.
The Woori Kookmin Party demanded a special counsel investigation into whether the president had really taken favors from the GL Group, while the Saehan Korea Party pushed back hard, calling it a baseless smear.
At the center of it all was Representative Namgoong Seok.
He raised his voice, insisting that the ruling and opposition parties should reach an agreement and hurry the legislation through, but even if they passed a law at once, stopping the GL Entech IPO was impossible.
So Namgoong Seok turned to GL Chemical and demanded a countermeasure.
“GL Chemical shareholders are suffering enormous losses right now. If the GL Group is going to push ahead with the listing, you should first prepare a compensation plan for GL Chemical shareholders. Please distribute 20 percent of the GL Entech shares held by GL Chemical to existing shareholders as an in-kind dividend. That is the bare minimum of decency you owe them.”
The reason GL Chemical’s stock was collapsing was simple: its core business division had been split off. If the company handed GL Entech shares to shareholders, it could offset the damage to some extent.
That might even help defend the share price from falling any further.
But GL Chemical had reasons it could not do that.
The shares GL Entech was offering through new share issuance and secondary sales amounted to 20 percent of the company. On paper, the ratio was reasonable enough, but the problem was the size.
At the offering price, the total came to a staggering 1.6 trillion won.
It was the largest public offering in KOSPI history.
In other words, Namgoong Seok was demanding that GL Chemical hand over shares worth that same astronomical sum to its shareholders as a dividend.
The current offering price had been set on the basis of that 20 percent float.
If another 20 percent of shares were suddenly added to the market, the sheer overhang would inevitably force the price down.
Even if that did not happen, once shareholders who received the dividend started selling, the stock could easily collapse. It might even fall below the offering price.
Inquiries flooded in from every direction, and the exchange demanded a clear position.
Inside the GL Group, the issue was discussed repeatedly.
“Investors are worried we might still do an in-kind dividend after the listing.”
“Some have already said they’ll withdraw from the offering.”
“If we make 20 percent of it an in-kind dividend, there’s a high chance the offering won’t be fully subscribed.”
“We’re already going forward with the listing over strong opposition. If the stock then collapses, we’ll be accused of forcing through an unreasonable IPO.”
For all those reasons, there was no way they could agree to a stock dividend.
In the end, GL Chemical made its position public.
“To protect investors participating in the offering, GL Chemical will extend the lock-up period on the GL Entech shares it holds from the current six months to three years, and the lock-up period for institutions will also be extended to at least one year.”
A lock-up meant the shares could not be disposed of during that period.
So this was no different from declaring that there would be no in-kind dividend for three years.
Instead, GL Chemical announced what it called shareholder protection measures: increasing its payout ratio, introducing an interim dividend, and strengthening investment and capabilities in its core petrochemical business.
But without the most important measure of all—the in-kind share dividend—it was nowhere near enough to stop the stock from crashing.
The share price, which had once climbed above 1 million won, had been cut in half and was now sinking toward the 500,000-won range.
Small shareholders of GL Chemical were left stunned and speechless.
I met Chairman Yoo Jae-ho.
First, we talked business.
“I got a call from Nextrogen.”
Nextrogen was the hydrogen car platform company we had acquired and then sold off to the Rush Fund.
Because the public had already been burned once by the Thomas Motors disaster, people were generally skeptical of hydrogen trucks.
Even when Nextrogen first unveiled its prototype, the reaction was basically, So what scam are they trying to pull this time?
But once word got out that Saudi Arabia was investing, the atmosphere changed.
“What did they say?”
“They said they’d like to work with Yuseong ES. They must have been putting a lot of effort into GL Entech all this time, so I never expected them to come our way.”
Unlike electric vehicles, which run on batteries, hydrogen cars generate electricity from hydrogen and use that to move.
On the surface, that made hydrogen cars sound like they had nothing to do with batteries, but in reality they still carried a small battery.
They needed somewhere to temporarily store the electricity generated from hydrogen.
“I recommended you. It’s better when people who know each other work together.”
“I thought as much. Thank you.”
Once the announcement went out, it would be a major positive for Yuseong ES and a major negative for GL Entech.
“Still, I was curious how you were planning to back Namgoong Seok, but I never imagined it would be through something like this.”
Even I had to admit it was an absurdly unexpected move.
It let me support Namgoong Seok and make money at the same time.
I had given Yoo Jae-ho a heads-up beforehand as well, so he had likely invested his hidden funds long ago and already booked a hefty profit.
Opportunities that duplicated money like this did not come along often.
“No one expected the GL Entech listing to become this much of a problem. Chairman Go Jae-ik must be in a very difficult position.”
In cases like this, the blame usually fell on the hedge fund that had shorted the stock.
But this time, the criticism was being hurled at the GL Group rather than Continue Capital, because it was forcing the listing ahead despite the warnings about a potential collapse in the share price.
Again, in the first timeline, this would have been a quiet listing and nothing more.
But this time, Continue Capital had pulled the National Assembly and even the Blue House into the mess, turning it into a matter of public interest.
“The chaebols all seem to hate Namgoong Seok’s bill. What do you think, Chairman?”
The public favored it, but the conglomerates were unanimously against it.
People wanted to know where Yuseong Group, the first family of the business world, stood on the issue, but despite repeated requests from the press, they had said nothing at all.
Chairman Yoo Jae-ho gave a wry smile.
“Honestly, I’m not thrilled about it. It’s a convenient way to make money.”
“I like how honest you are.”
“If the bill really passes, companies preparing for succession will have their hands full.”
When did subsidiary listings in the chaebol world happen most actively?
Exactly when the group was being handed down to a child.
Subsidiaries usually had a large stake held by the children.
They would list these companies one after another, sell the shares, and use the proceeds to pay the inheritance tax on the shares of the parent company they had inherited.
If the parent company’s stock fell because of the subsidiary listings, the inheritance tax bill shrank by the same amount, so they got two birds with one stone.
In a way, it was a succession carried out by emptying the pockets of small shareholders.
Again, that was why the Korean stock market was always such a mess. If only this problem were fixed, the market would probably rise sharply.
By now, the era when companies could grow that way was over. From here on, shareholders would no longer be as easy to take for granted.
In truth, even if the practice were regulated by law, it would not be a blow to business activity.
After all, it was nothing more than a way to siphon money from small shareholders. It was not exactly some grand engine of economic efficiency.
“Namgoong Seok is getting quite a bit of attention, but... can he really beat Representative Im Chang-sik with this alone? Once the GL Entech listing is over and done with, the issue will die down. There’s a good chance the bill itself will fizzle out, too. It’s not going to be easy to carry this popularity all the way to the primary.”
I smiled to myself.
No one knew it yet, but the GL Entech listing was not the end. It was only the beginning.
I looked at Chairman Yoo Jae-ho and said, “Could you introduce me to the president of Yuseong Securities, if possible?”
At the JR Blackwood Hotel in Seocho-dong, I met Sung Yoon-ah in the coffee shop.
“We’re just talking. Why did you book such an expensive place?”
“It was free anyway.”
At that, she looked genuinely surprised.
“Why is it free?”
“I helped when the Blackwood Hotel problem came up, and Chairman Taylor gave me a card that lets me use Blackwood Hotels all over the world for free.”
“Really? Lucky you.”
She looked sincerely envious.
No matter how much money you had, free was free. It was hard to resist.
“Oh! Come to think of it, Hyeon-ji called me yesterday.”
“What did she say?”
“Nothing special, just chatted about this and that, and she asked a little about you too.”
“About me?”
“Yes. She didn’t say it directly, but it sounded like she wanted to meet you once.”
I thought back to Go Hyeon-ji’s face from that day.
She was pretty, all right.
As I was thinking that, I noticed Sung Yoon-ah staring at me intently.
“What? Do you want to meet her?”
I shook my head.
“No. What would I do by meeting her?”
If I was going to see her at all, it would be better after everything else was finished.
By the time we finished talking, the appointed hour had arrived.
I got up with Sung Yoon-ah.
“Let’s go upstairs.”
We took the elevator to the top floor of the hotel, where five people were already gathered in the room.
A middle-aged woman who resembled Sung Yoon-ah saw me and greeted me warmly.
“It’s nice to see you. How have you been?”
“I’ve been well. It’s been a while. I heard you were promoted this time, so congratulations.”
Her name was Yang Jae-eun.
She was the daughter of Chairman Yang Hyeon-seong of DA Financial Group and Sung Yoon-ah’s mother.
After serving at DA Card, she had been promoted and moved to DA Bank as an executive director. At this point, it was safe to say she was on the heir track.
When I asked Sung Yoon-ah to arrange a meeting with the president of DA Securities, she relayed that the president would also like to attend, and I agreed.
But there was one person sitting there whom I had not invited.
I looked at him and asked, “You must be busy. What brings you here?”
“Your brother came to help.”
“Do you really have to?”
“Hey now. Keep that up and you’ll hurt your brother’s feelings.”
Worried he might get kicked out, Heo Min-woong quickly tried to act familiar with Sung Yoon-ah.
“Oh! Yoon-ah. Long time no see.”
“Hello, Oppa.”
“You two were company recruits together, right? Wow! What are the odds? This is why Koreans are all connected by one degree of separation, huh?”
I was about to throw him out, then decided against it.
It wasn’t exactly a conversation they should be barred from hearing.
The other three were people I was meeting for the first time today: Jung Nam-cheol, president of Yuseong Securities; An Ho-jung, president of DA Securities; and Heo Seok-yoon, president of Hwaan Securities.
Among them, Yuseong Securities was one of the big three securities firms, while Hwaan Securities and DA Securities were mid-sized firms with market caps under 500 billion won.
As for me, I was famously on bad terms with the chaebols, but I did have some ties with these three groups.
I greeted President An Ho-jung first.
When I had first joined the securities firm, the president at the time had been dismissed after the Primus scandal, and he was the one who came in afterward.
So this was actually the first time I was seeing his face in person.
“I heard you used to work at our company.”
“That’s right.”
You could say eighty percent of what made me came from DA Securities.
I greeted the other two presidents one by one as well.
Once the greetings were over, I stood before them and said, “Thank you all for making time to come here when I know you’re busy. I arranged this meeting because I have a few things to tell you.”