This Year's Stock Surge Keywords: Major Shareholder Change and Secondary Battery New Business

RF Semi, Ecopro, EV Cheomdan Sosae, Suprema ID, etc. Surge
Positive Factors from Major Shareholder Changes or New Secondary Battery Business 추진

In the stock market where investors seeking high returns gather, stocks that surge hundreds of percent in a short period have appeared every year. The side effects of such short-term surges have also been significant. Many investors have lost their entire principal in a short time by investing in theme stocks. This year is no exception. Individual investors flocked to listed companies where the largest shareholder changed and announced plans to pursue new businesses. Market experts advised that investors could incur losses by investing in short-term surging stocks and urged them not to be swept up by the hype but to carefully check whether there is an improvement in performance.

Since the beginning of this year, the majority of stocks that surged sharply in the domestic stock market have experienced changes in their largest shareholders. The new largest shareholders announced plans to pursue new businesses related to themes that have attracted great interest in the domestic stock market, such as secondary batteries and biotechnology.

RF Semi’s Stock Price Soars 930.3% After Change in Largest Shareholder

According to the Korea Exchange on the 2nd, the listed company with the largest stock price increase this year is RF Semi. The company's stock price jumped 930.3%, from 2,310 KRW at the end of last year to 23,800 KRW on the 1st. EcoPro, which received the most attention in the domestic stock market this year, followed with a 445.6% increase. HLB Innovation (420.6%), VIVE Advanced Materials (389.7%), and Suprema ID (377.7%) also ranked in the top five for stock price increases in the domestic market.

Among these, RF Semi, HLB Innovation, and Suprema ID are three companies that changed their largest shareholders this year. RF Semi began its stock price surge after deciding to issue new shares worth 20 billion KRW to Jinpyeong Electronics on March 31. Jinpyeong Electronics secured 4.71 million new shares of RF Semi by paying the capital increase funds the day before. Earlier, RF Semi held an extraordinary general meeting on the 22nd of last month and appointed Kim Jae-seok, who serves as Chief Technology Officer at Shanxi Lanwan Jinpyeong New Energy Co., Ltd., as a non-executive director. Jinpyeong New Energy is an affiliate of Jinpyeong Electronics. The new director Kim is an expert who has worked on battery research at LG Chem, Hanwha Chemical, and Samsung SDI.

RF Semi is actively pursuing the lithium iron phosphate (LFP) battery business with its new largest shareholder Jinpyeong Electronics. Over the next ten years, it will receive an annual supply of 50 million cylindrical LFP battery cells from Jinpyeong New Energy. Demand for cylindrical LFP batteries is increasing as the American electric vehicle company Tesla adopts cylindrical batteries. RF Semi expects to generate annual sales exceeding 300 billion KRW from cylindrical LFP battery sales.

RF Semi recorded consolidated sales of 33.2 billion KRW and an operating loss of 10.5 billion KRW last year. After recording an operating profit of 600 million KRW in 2018, it posted operating losses for four consecutive years from 2019. Sales decreased from 51.9 billion KRW in 2018 to the 30 billion KRW range. The company developed and produced ECM semiconductors that convert audio signals into electrical signals, and TVS semiconductors used in signal input/output ports and power terminals of electronic devices.

Due to the sluggish performance of its existing business, the stock price had been on a downward trend until last year. The stock price, which had been hovering near the bottom, surged sharply immediately after news of the new business pursuit was announced. Market capitalization soared from 25.1 billion KRW at the end of last year to 264.4 billion KRW on the 1st.

HLB Innovation decided on February 1 to sell shares held by the existing largest shareholder to KOSDAQ-listed HLB. Subsequently, it changed its name from PSMC to HLB Innovation and appointed Kim Hong-chul, former executive of the KOSDAQ Association and current vice president of HLB Group, as the new CEO. HLB plans to strengthen HLB Innovation’s existing core semiconductor lead frame business and foster the automotive semiconductor business. Additionally, it established a bio-business division and decided to strengthen technological cooperation with Verismo Therapeutics, which is developing next-generation CAR-T anticancer drugs. Verismo’s COO Lee Byung-geol and research analyst Jin In-hye were appointed as inside directors of HLB Innovation.

Expectations for the new bio-business led to a rise in the stock price. Until last year, HLB Innovation was just a penny stock, but it closed at 4,935 KRW the day before.

Suprema ID held an extraordinary general meeting on the 26th of last month. Cho Dong-hyuk, chairman of Hansol Chemical, was appointed as a non-executive director, and Yoon Sang-chul, CEO of Gurupin Korea, and Kim Nam-gyun, lawyer at Law Firm Sia, were newly appointed as inside directors. Earlier, Suprema HQ, the existing largest shareholder, transferred 1.56 million shares on April 11 to Global One-Withwin New Technology Investment Association No. 1 and three others. Suprema ID changed its name to Experix and is pursuing new businesses related to chemical products.

The financial investment industry is paying attention to the fact that the largest contributor to the Global One-Withwin New Technology Investment Association, the largest shareholder of Suprema ID, is Cho Dong-hyuk, chairman of Hansol Chemical. As a non-executive director of Suprema ID, Chairman Cho is expected to play a role in establishing the new business.

Various interpretations have emerged regarding Chairman Cho’s acquisition of Suprema ID. He holds 46.53% of the association’s shares, which is 0.9 percentage points higher than the 45.63% held by Yoon Sang-chul, the new CEO of Suprema ID.

There is also a possibility that Chairman Cho will use Suprema ID as leverage to strengthen his management rights over Hansol Chemical. His stake in Hansol Chemical is 11.65%, which is lower than the 11.95% held by the National Pension Service. BlackRock Fund and VIP Asset Management also hold 6.09% and 5.02% stakes in Hansol Chemical, respectively. Considering succession, the Cho family needs to secure additional shares. Chairman Cho used his cash not to acquire more shares of Hansol Chemical but to acquire Suprema ID.

An official from a listed company said, "In the past, when the largest shareholder of a marginal or perennial deficit company changed, expectations for structural improvement tended to increase," adding, "However, this year, the surge was more pronounced due to the association with the secondary battery theme."

Secondary Battery Theme Frenzy: Everyone Pursues Secondary Battery New Businesses

EcoPro’s stock price rose sharply due to expectations of increased material sales driven by surging secondary battery demand. The surge in secondary battery theme stocks that started with EcoPro spread to VIVE Advanced Materials. The stock price, which had hovered around 2,000 KRW until the end of March, soared to 17,780 KRW on April 19. In just 12 trading days, the stock price increased sevenfold. The company is newly pursuing a business to secure and supply lithium hydroxide used in batteries from overseas to the domestic market. VIVE Advanced Materials also produces flexible printed circuit boards (FPCB) for electric vehicle batteries and is actively targeting the electric vehicle market to increase sales.

Until just six months ago, VIVE Advanced Materials was in poor financial condition, to the extent that it decided on a capital reduction to improve its financial structure. In March, it attempted a rights offering through a shareholder priority subscription, but the subscription rate was only 68.6%. It was able to secure the planned funds through a general public offering of unsubscribed shares. The 19.6 billion KRW raised through the capital increase will be used to repay borrowings.

VIVE Advanced Materials recorded sales of 16.6 billion KRW and an operating profit of 200 million KRW in the first quarter of this year. Sales increased by 27.6%, and operating profit turned positive. The stock price surged as the company pursued the secondary battery new business, a theme favored by individual investors, along with improved performance. However, due to short-term profit-taking, the stock price fell to about half of its peak within a month.

Jaigle, whose stock price rose 278.7% as of the 1st this year, also stimulated investor sentiment by pursuing a secondary battery new business. Based on the all-time high of 38,900 KRW on April 4, the year-to-date increase reached 615.1%. Since then, the stock price has declined, closing at 20,600 KRW the day before. In response to an inquiry about the reason for the stock price surge, Jaigle stated that it is negotiating details regarding the establishment and investment of a secondary battery joint venture (JV) in Virginia, USA. Jaigle will issue new shares to the XT ESS Fund to raise 30 billion KRW, with the payment date set for the 30th. The company introduced the largest shareholder of the XT ESS Fund as XT Spec Fund, headquartered in Washington, USA. XT Spec Fund is known as a specialized secondary battery investment firm.

In addition, stocks such as Jungang D&M, Crystal New Materials, and Lake Materials surged due to expectations for secondary battery-related businesses. As EcoPro and EcoPro BM continued their rally, individual investors sought the "second EcoPro," and theme stock investing flourished.

A financial investment industry official explained, "What is noteworthy in the domestic stock market in the first half of this year is the revaluation of material companies in the secondary battery value chain," but added, "There were many cases where listed companies unrelated to secondary batteries saw their stock prices surge after announcing new business pursuits." He advised, "There are various variables until new businesses yield results. Since many listed companies have already peaked and halved in price, investors need to be cautious."