GL Entech (3)
[Continue Capital Acquires a 5 Percent Stake in GL Entech]
[GL Entech Stock Surges Abnormally. Is Continue Capital Behind It?]
[Exchange Says There Are No Signs of Price Manipulation]
Huh? Continue Capital bought five percent?
What on earth is going on?
Didn’t they like short selling?
They were just shorting GL Chemical like crazy, so why are they buying GL Entech?
So was Continue Capital the one driving up the stock all this time?
The article says they poured in roughly 8 trillion won.
If they started buying when it was under 100,000 won, haven’t they already doubled their money?
That’s only on paper, though. They’d never be able to sell at that price. The moment Continue Capital starts unloading, it would crash.
In the first place, 8 trillion won is enough to buy up the stock of almost any KOSPI company.
And if it’s 8 trillion won, isn’t that money just profit from shorting GL Chemical anyway?
lol, GL Group kindly handed them the cash to buy GL Entech.
More accurately, it’s retail shareholders’ money from GL Chemical. GL Group didn’t lose a single won.
What exactly were they thinking when they bought that thing?
After GL Entech went public, Continue Capital went after the stock without the slightest hesitation.
Along with the supply contracts with Nextrogen and Yuseong ES, we kept announcing hydrogen truck investment plans one after another, pushing GL Entech’s stock down as far as possible so we could accumulate shares more easily.
But just as I expected, the more we bought, the steeper the price climbed. At 200,000 won, at 250,000 won, we kept scooping up every sell order that hit the market.
"We’re lucky we finished buying before anyone caught on."
"You worked hard."
Continue Capital’s purchases amounted to 5 percent of the total outstanding shares, just a little over 40 million shares.
To buy that much stock, you couldn’t just keep hammering the buy button and call it a day.
You had to keep placing orders little by little, matching the market’s selling volume that day and staying patient.
In cases like this, people usually bought slowly over the course of months. But the longer it dragged on, the greater the chance that someone would realize a large player was quietly accumulating shares.
So we pushed a little hard. And once we crossed the 5 percent mark, we filed the disclosure by law.
"So with that, you’ve got your hands on the KOSPI’s second-largest company."
Maybe someone would think five percent wasn’t enough to matter, but I only smiled and said, "No. To be exact, we’ve got our hands on the KOSPI itself."
Continue Capital’s disclosure came out right after the market closed, so there was no immediate shock in the market itself. But the securities firms went into an uproar.
Every time Continue Capital made a move, it sent tremors through the stock market. So everyone immediately started digging, trying to figure out what it was up to.
But Sung Yoon-ah, who had already been tipped off by me in advance, understood what had happened at once.
She remembered that day clearly.
At the meeting where the securities-company presidents had been gathered, I had said what I needed to say and left.
What I asked for there came down to three things. First, don’t lend out retail investors’ shares for short selling without permission. Second, take only a small allotment in the GL Entech offering. Third, don’t issue index-based options, and if you already had, make sure you hedged them.
The decision was ultimately each securities firm’s to make.
They had no reason to obey the orders of some private individual. But no one could simply brush my words aside, either.
Heo Min-woong told Chairman Heo Seok-yun that they had to follow my lead no matter what, and Chairman Jung Nam-cheol of Yuseong Securities also said he would comply, whether that came from Chairman Yoo Jae-ho or not.
DA Securities was no different.
The biggest reason was simple: even if they listened to me, they wouldn’t lose much. As it turned out, that judgment was right.
Heo Min-woong: "You saw the filing, right? What’s the mood like over there?"
Sung Yoon-ah: "It’s chaos. What about Hwaan Securities?"
Heo Min-woong: "I’m on my way to Hwaan Securities to see Chairman Heo Seok-yun. Wow! How is something like this even possible?"
Sung Yoon-ah: "Exactly."
Heo Min-woong: "It’s insane. Did he have this planned from the moment he started shorting GL Chemical?"
Sung Yoon-ah: "Probably."
Heo Min-woong: "Then everyone’s been moving on a board Miru set up for them. So that’s why he told us to hedge the options. If he hadn’t told us in advance, what would we have done?"
Sung Yoon-ah: "If it gets out that securities firms lent retail investors’ shares for short selling, it’ll be a huge problem."
Sung Yoon-ah: "I think we should follow Miru’s suggestion after all, oppa. What do you think?"
Heo Min-woong: "We should. If it’s Miru, we follow him no matter what."
Fortunately, the moment those three securities firms heard me out, they stopped using retail investors’ shares for short selling.
The other securities firms, though, were not so quick to stop.
There was going to be an enormous aftershock.
"Looks like I’ll have to go along with Miru’s suggestion. What do you think, oppa?" Sung Yoon-ah asked.
"We should. If it’s Miru, we follow him no matter what," Heo Min-woong said.
KD Securities was considered one of South Korea’s three biggest brokerage houses, alongside Yuseong Securities and Mirae Securities.
KD Securities had served as one of the lead underwriters for GL Entech, together with Mirae Securities and Jaein Securities.
The largest IPO in history, a massive 16 trillion won capital raise, had ended in success.
KD Securities, which had received the largest allotment, made hundreds of millions of won in fees and saw a huge jump in new accounts as well.
If someone helped you, the proper thing was to repay the favor.
That was why KD Securities had kept pumping out buy recommendations for GL Entech. The analysts at KD Securities were the ones who first set the target price at 250,000 won and the ones who said GL Entech could overtake DATL within a few years.
But before long, the stock had already blown past the 250,000 won target.
Jo Gyeong-hwi, the chairman of KD Securities, sensed that something was off.
The rally was moving too fast.
He called in division head Park Hyun-dong and gave him an order.
"Find out exactly who’s buying GL Entech shares."
"Understood."
But before they could even finish checking, Continue Capital’s disclosure came out and solved the mystery for them.
"Continue Capital? What the hell are those bastards thinking, buying 5 percent of GL Entech?"
Park Hyun-dong said, "It looks like they’re trying to manipulate the stock price."
"Hmm. Manipulate the stock price, huh... So they’re planning to accumulate shares, drive the price up, and dump them at a profit?"
"That would be my guess."
"It won’t be easy."
With 8 trillion won, you could move the stock price of 99 percent of listed companies, except for the top ten or so.
And yet no one did that, for two obvious reasons.
The first was simple: they didn’t have 8 trillion won.
How many companies could move 8 trillion won in cash at one time, not just assets?
The second was that even if they could, it would not bring much benefit.
Buying a mountain of shares and pushing the price higher was useless if there was nobody willing to buy even more expensively. The moment you sold, the price would plunge again, and you’d end up taking the loss instead.
This time was no different.
The stock had risen because of Continue Capital’s buying.
They might be able to dump some of the shares at a premium, but once Continue Capital started selling, the price would quickly fall back to where it had been.
Continue Capital had bought a company worth 80 trillion won at the IPO price and driven its market cap up to 200 trillion won.
Even now, the price was already absurd.
How much higher could they possibly drive it?
It wasn’t rare at all for manipulative trading groups to mess around and push a listed company’s stock price up tenfold or twentyfold.
But that was only in the case of small Kosdaq companies with tiny market caps.
Because their market caps were small to begin with, the money required was only tens of billions of won, and even if the stock price soared, the market cap would only rise by a few hundred billion won, maybe a little over a trillion at most.
GL Entech was different.
Even if the stock price merely doubled from where it was now, its market cap would rise by another 200 trillion won.
There was no way that was possible...
Then Chairman Jo Gyeong-hwi realized something crucial.
"What the hell!"
The sudden curse startled Park Hyun-dong. "What is it?" he asked.
Jo Gyeong-hwi shot to his feet. "Continue Capital’s goal isn’t something as small as stock-price manipulation."
"W-what do you mean?"
"Those bastards are trying to manipulate the stock market!"
"...What?"
Based on the current share price, GL Entech accounted for roughly 8 percent of the KOSPI.
If the price doubled from here, that share would rise to 16 percent. If it tripled, it would jump to 24 percent.
When GL Entech moved, the KOSPI moved with it.
The problem was that GL Entech had been added to the KOSPI 200. The KOSPI 200 index, which collects the 200 representative stocks in the Korean market, is used as the underlying asset for almost all futures, options, and derivatives.
What if a single stock could make the KOSPI 200 rise and fall?
The ripple effect would be beyond imagination.
Chairman Jo Gyeong-hwi shouted, "Check every futures, options, and derivatives product tied to the index right now!"
WST Exclusive: Continue Capital’s GL Entech Buying Is Only Just Beginning
[Omitted]
Continue Capital invested about 8 trillion won, or $70 billion, to acquire 5 percent of GL Entech, making it the second-largest shareholder after GL Chemical, which holds 80.3 percent.
CEO Lockhart explained the reason for buying GL Entech this way:
"GL Entech is a very good stock. It is rare to see a stock rise this much in such a short time."
He pointed to supply and demand as the reason for the rally.
GL Entech’s free float is only 9.6 percent, so there are not many shares available in the market. The problem is that this supply shortage is unlikely to be resolved any time soon.
The controlling shareholder, GL Chemical, extended the lock-up period from the usual six months to three years in order to protect investors, and even the institutions that received allocations were forced into lock-ups of at least one year instead of simple contractual commitments.
Both contractual commitments and lock-ups are promises not to sell shares for a certain period of time.
But there is one major difference between the two. One can be broken; the other cannot.
A contractual commitment can be violated, even if penalties are imposed, and the shares can still be sold.
A lock-up is different.
Because the shares are deposited with the Korea Securities Depository for the duration of the period and returned only when it ends, there are no shares in hand to sell before then, which makes a sale impossible even if one wants to sell.
There will be no overhang issue for the next eleven months, but buying pressure is not expected to ease.
Since Continue Capital has already bought 5 percent, only 4.6 percent of the stock remains in the market.
On top of that, passive funds and pension funds have already piled in because of the KOSPI 200 inclusion. Once a stock becomes a key index constituent, it is very hard to sell it back even if the price rises. In fact, funds that missed out earlier are now scrambling to buy.
If institutions that had been holding back on purchases also join in, the already scarce supply will shrink even further.
Another problem is short selling.
Most experts estimate GL Entech’s fair value at around 130,000 to 150,000 won.
Compared with other battery companies, anything above that is clearly overvalued. So once GL Entech moved above 150,000 won, short selling flooded in.
GL Entech’s current short interest is estimated at around 2 percent of total shares.
That is not an overwhelming amount.
But because the number of tradable shares is shrinking so quickly, those short sellers are likely to rush into short covering.
If that happens, the amount of tradable GL Entech stock will fall below 2 percent.
Asked how much more he planned to buy, Lockhart said the following:
"We plan to buy another 3 percent or so. We still haven’t even used all the profits we made from GL Chemical."