Government to Sell All Forecast Holdings by 2022
Last Year’s COVID-19 Disruptions Delayed Sales... Stock Price Rebound This Year Expected to Accelerate Sales
Additional Share Sales Likely in July as Lock-up Period Ends
[Asia Economy Reporter Kim Jin-ho] From the second half of this year, the complete privatization (share divestment) of Woori Financial Group is expected to gain momentum. After a significant drop last year, the stock price has recently entered a clear upward trend, leading to evaluations that the government's share divestment roadmap targeting next year is now on track. Following the sale of a 2% stake to domestic and foreign institutional investors in April, there is talk of an additional share sale as early as July.
On the 11th, an official from the Financial Services Commission’s Public Fund Committee, which is leading the share divestment, said, "Once the lock-up period is lifted after July, we will decide on additional sales based on market conditions," adding, "There are many factors to consider comprehensively, such as demand and supply, but the rise in stock price is analyzed as a favorable environment."
The Financial Services Commission announced the ‘Woori Financial Remaining Shares Divestment Roadmap’ in 2019. The plan was to sell all shares held by the Korea Deposit Insurance Corporation (KDIC) under the Financial Services Commission in three to four rounds, with up to 10% at a time by next year. However, last year, Woori Financial’s stock price fell significantly due to the COVID-19 crisis, failing to reach KDIC’s principal recovery price (about 12,000 KRW), causing setbacks in the share divestment.
However, the situation changed this year, accelerating the share divestment. This was influenced by the rapid rise in bank stocks as interest rates began to increase early this year. Accordingly, KDIC sold 2% of its shares (14,445,354 shares) to domestic and foreign institutional investors in April at a price of 10,300 KRW per share. Since the stock price had somewhat recovered, the decision focused more on the speed of divestment to complete the roadmap rather than recovering the principal.
At that time, the Public Fund Committee stated, "If the stock price recovers following the COVID-19 recovery, it will be possible to sell at a more appropriate price than now," and added, "This sale emphasized prompt recovery."
Stock Price Hits 52-Week Highs Daily... Increased Possibility of Additional Share Divestment in Second Half
While the government emphasized the importance of swift divestment in the previous share sale, Woori Financial’s stock price has continued to rise daily, increasing the likelihood of additional share sales in the second half. As of the previous trading day, Woori Financial’s stock price was 11,300 KRW, a significant 72.25% increase compared to March 23 of last year (6,560 KRW). It has also risen about 10% compared to the price at the time of the sale just a month ago.
In particular, if the stock price rises more than 8% from the previous closing price (11,300 KRW), KDIC can expect profits. In this case, it aligns with the government and political circles’ principle of ‘maximizing public fund recovery’ to avoid losses after investing taxpayers’ money, which is seen as completely alleviating concerns about the complete privatization of Woori Financial.
A banking industry official said, "The so-called ‘fire-sale’ controversy was one of the biggest obstacles to the government’s complete privatization of Woori Financial," adding, "If the stock price exceeds KDIC’s principal recovery price, the government will have more flexibility in share divestment."
According to the financial sector, the next share divestment by the Public Fund Committee is expected as early as July. This is because a lock-up period was applied to KDIC’s remaining shares (15.25%, about 110.16 million shares) after the April sale. Typically, a three-month lock-up period is imposed after share divestment. Since there is not much time left until the end of next year, there is a high possibility that additional share sales will be expedited.
A financial sector official hinted, "KDIC is steadily conducting preliminary market research for share divestment," adding, "They are busy attracting new investors in a way that minimizes the impact on the stock price."
Meanwhile, with the possibility of dividend policy recovery and base interest rate hikes being discussed in the second half of this year, Woori Financial’s stock price is expected to have further upside potential. Four securities firms?Hyundai Motor, SK, IBK, and Cape?raised their target prices for Woori Financial in April. The average target price from securities firms is 13,212 KRW, indicating about a 17% upside potential compared to the previous closing price (11,300 KRW).
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