[Governance] Hong Seok-pyo, President Who Became the Largest Shareholder of Korea Steel, Secret of Succession Funds: 2000% Dividend②

[Graphic and Analysis by Hee-jin Lim]

[Asia Economy Reporter Park So-yeon] It has been revealed that Hong Seok-pyo, who recently became the largest shareholder of Korea Steel, secured succession funds through dividends from affiliated companies over the past decade. In addition to Korea Steel, a key affiliate and a listed company, unlisted affiliates were used for bomb dividends benefiting the major shareholder.

According to the Financial Supervisory Service's electronic disclosure system on the 7th, from 2011 to 2020, Hong received a total of 17.8 billion KRW in dividends from three companies: Korea Steel, Kisswire Holdings, and Kistron (formerly Seokcheon).

From Korea Steel, he received dividends ranging from 400 million to 900 million KRW annually during the same period, totaling 6.46376 billion KRW over ten years.

From Kisswire Holdings, he received dividends ranging from 200 million to 5 billion KRW annually, accumulating a total of 7.71125 billion KRW over ten years. Kisswire Holdings is owned 50.25% by Chairman Hong Young-cheol and 49.75% by Hong.

Notably, in 2020, the total dividend amount was set at 10 billion KRW, ten times higher than the previous year. Hong received half of this amount, 4.975 billion KRW.

At that time, the dividend per share was 100,000 KRW, with a dividend yield of 2000%. That year, the company's sales were 980 million KRW, and it recorded an operating loss of 825 million KRW, resulting in a deficit.

From Kistron, he also received dividends exceeding 3.6 billion KRW over ten years. Kistron is owned 28.3% by Chairman Hong and 24.14% by Hong.

In 2020, the dividend per share was increased to 5,000 KRW (a 100% dividend yield), ten times the previous year, resulting in a total dividend of 1.6 billion KRW. That year, sales were 1.598 billion KRW, with an operating loss of 1.629 billion KRW.

Having earned a total dividend profit of 17.8 billion KRW over ten years, Hong recently focused on purchasing shares of Korea Steel, a key affiliate and listed company.

Taking advantage of the high stock price volatility after COVID-19, Hong steadily conducted on-market purchases. Over two years from 2020 to 2021, he bought approximately 430,000 shares on the market, amounting to about 6.6 billion KRW.

In 2020 alone, he made 11 purchases totaling 424,795 shares (6.45 billion KRW), concentrating purchases from February to May during the early stages of the COVID-19 outbreak. Last year, he additionally purchased 6,719 shares (0.03%) on December 1 and 1,397 shares (0.01%) on December 2.

Large-scale gifts were also made. On February 4, 2020, when stock prices plummeted shortly after the COVID-19 outbreak, Chairman Hong gifted 200,000 shares (1%) to Hong, valued at approximately 3.5 billion KRW at market price.

On the 25th of last month, when stock prices sharply dropped due to the spread of the Omicron variant in Korea, Chairman Hong gifted an additional 1.15 million shares (5%) to his son, Hong Seok-pyo. The closing price that day was 19,550 KRW, amounting to 22.5 billion KRW based on the closing price.

With this gift, Hong's stake changed from 15.07% to 20.07%. Chairman Hong Young-cheol's stake decreased from 16.49% to 11.49%, making Hong the largest shareholder.

Accordingly, the shareholder composition and shareholding ratio of Korea Steel are as follows: Hong Seok-pyo 20.07%, Kisswire Holdings 15.24%, Kistron 14.12%, Hong Young-cheol 11.49%, and nine other related parties including Hong Seok-pyo holding a total of 67.73%.

A financial investment industry official said, "Succession work is underway through high dividends using holding and affiliated companies, stock purchases, and gifts taking advantage of low stock prices." He added, "Changes in Korea Steel's governance structure can be expected in the future."