KOSDAQ Listed Companies' Free Stock Issuance in H1 Up 47% YoY... Varied Effects on Stock Prices
[Asia Economy Reporter Eunmo Koo] The number of free stock dividends among KOSDAQ-listed companies in the first half of this year increased compared to last year. However, the effect on stock price support varied by company.
According to the Financial Supervisory Service's electronic disclosure system (DART) on the 6th, 25 KOSDAQ-listed companies conducted or are in the process of conducting free stock dividends in the first half of this year. This is a 47% (8 companies) increase compared to the same period last year (17 companies). In particular, 12 companies were concentrated in last month alone, and 18 companies disclosed free stock dividends in the second quarter, accounting for more than 70% of the total.
This was largely influenced by the stock market's successful rebound despite the COVID-19 pandemic. When the number of shares increases due to free stock dividends, even if the stock price falls due to ex-rights, the stock price can recover in a short period if the market enters an upward trend, and the market capitalization can also increase accordingly. The KOSDAQ index fell sharply to a low point (428.35) in March due to the impact of COVID-19 but rose more than 75% until the 3rd (752.18).
The effect on stock price support was found to be mixed. Among the 25 companies that disclosed free stock dividends in the first half, 10 companies (40%) saw their stock prices rise compared to the trading day before the ex-rights date or in cases where ex-rights was not conducted, while 14 companies (56%) saw a decline.
Among the 20 companies that first conducted free stock dividends, 8 companies saw their stock prices rise above the ex-rights reference price. Mobile Appliance showed the highest increase at 54.3%, followed by ECS (33.4%) and MedPacto (27.9%). On the other hand, Namuga (-29.3%) and Osteonic (-17.0%) declined. Since free stock dividends increase the number of shares by the ratio of the capital increase, the value of shares holding the right to receive new shares and shares whose rights have expired differ. Accordingly, the gains and losses of free stock dividends are determined by the stock price movement after the ex-rights date when the right to new shares disappears.
Among the 5 companies that decided on free stock dividends but have not yet undergone ex-rights, 2 companies saw their stock prices rise compared to the trading day before the disclosure. YMT (13.8%) and FutureChem (2.7%) rose, but Jaan (-29.4%), CareLabs (-13.4%), and Hugel (-2.7%) declined.
Free stock dividends are generally considered a positive factor for stock prices. They help expand trading volume and can be interpreted as a signal that the company's financial condition is sound. When the number of shares increases due to free stock dividends and trading becomes active, undervaluation caused by insufficient trading volume can be resolved. Since free stock dividends increase capital and the number of shares without receiving money from shareholders, conducting free stock dividends can also mean that the company is solid enough to reduce surplus and increase capital.
However, caution is advised when investing in companies that have not been listed for long and whose major shareholders' lock-up periods have not ended. If free stock dividends become a means for major shareholders to recover their investment rather than shareholder returns, it can work disadvantageously for investors in the secondary market. Suyeon Kim, a researcher at Hanwha Investment & Securities, explained, "There is a possibility that major shareholders whose lock-up period has not ended after listing receive shares through free stock dividends and sell them when the stock price rises to recover their investment." Among the 25 companies that decided on free stock dividends in the first half, 4 companies have major shareholders whose lock-up periods have not ended, and among them, 3 companies' stock prices have been declining after the ex-rights date.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
