The Secret Behind the Sharp Fluctuations of Hyundai Saryo Co., Ltd.

Expectations for Canary Bio Stake Acquisition
Stock Price at 18,700 Won in Mid-March
Surged to 148,000 Won After Hitting Upper Limit 7 Times

Sharp Decline Due to Gift Tax Issues
Soaring Price Creates Burden
30% Drop Over Last 3 Trading Days

[Asia Economy Reporter Minji Lee] Hyundai Feed, which had achieved a nearly 700% return with seven consecutive limit-up days, is now sliding down. This is due to the shift from expectations of acquiring shares in Canaria Bio (formerly Duol Mulsan) to concerns.

As of 9:30 AM on the 6th, Hyundai Feed was trading at 81,900 KRW, up 1.11% from the previous trading day. Although the morning decline paused on this day, the stock had fallen more than 30% over the past three trading days until the previous day. Previously, Hyundai Feed recorded seven consecutive limit-up days starting from the 21st, achieving the highest return among both KOSPI and KOSDAQ stocks.

To explain Hyundai Feed's sharp stock price surge, one must look at the contract disclosure with Canaria Bio, which is traded on the unlisted market K-OTC. On the 21st of last month, Hyundai Feed signed a stock transfer agreement involving a change of major shareholder with Canaria Bio (Duol Mulsan), and two special relationship entities, Y-Field Union and Highride Consortium No.1 Union. Upon this news, the stock price, which was 18,700 KRW, soared to 148,000 KRW with consecutive limit-up days.

The rise in grain prices due to Russia's invasion of Ukraine improved investor sentiment toward feed stocks, but more importantly, the story that Canaria Bio would attempt a backdoor listing through acquiring Hyundai Feed shares spread, significantly influencing the stock price surge. Although Canaria Bio did not directly mention listing, the market evaluated this as a move considering business expansion and listing.

However, the stock price, which had shown an astonishing rise, turned to a sharp decline this month. The strongest factor behind the price drop is presumed to be the 'gift tax' issue. On the 18th of last month, major shareholders Kim Jong-ung, Park Jung-gyu, and Moon Cheol-myung gifted their shares to their children Kim Wan-tae, Kim Na-yeon, Moon Hyun-wook, Moon Hyun-chul, and Moon Hyun-jung, who then sold the gifted shares to Canaria Bio and others for 100 billion KRW the next day.

When gifting shares, it is standard to pay taxes based on market value, which is calculated by averaging the stock price over four months?two months before and two months after the gift date. With the recent rapid stock price surge, concerns about the gift tax burden on the recipients fueled rumors of contract cancellation, which is believed to have driven the stock price down.

However, since Canaria Bio is strongly committed to the acquisition, it seems difficult to place much weight on immediate contract cancellation. In fact, under domestic tax law, non-cash gifts can be canceled at any time within six months, so there is a high possibility that the contract will continue through gift cancellation and change of seller. Regarding this, a representative from Canaria Bio stated, "Since we decided to acquire shares believing we can create good synergy with the company, there will be no contract cancellation," adding, "Because a paid-in capital increase and convertible bond issuance are happening simultaneously, even if the contract is canceled, we could lose major shareholder status and the penalty would be significant."