TS Shampoo Under New Ownership Sees Stock Surge Before Announcement... Was Insider Information Leaked?

Stock Price Surges Days Before Management Rights Sale Announcement
Series of Disclosures Including Third-Party Allocation Rights Offering and CB Issuance
"Raising Funds at Low Prices Then Boosting Stock to Attract Investors"

TS Shampoo

The management rights of TS Trillion, the seller of ‘TS Shampoo,’ were sold on the 23rd. However, it was found that TS Trillion’s stock price had surged several days before the announcement was made. As a result, the market is raising the possibility that undisclosed information may have been leaked.

Stock Price Surge Starting 5 Days Before Announcement

According to the Financial Supervisory Service’s electronic disclosure, after the market closed on the 23rd, TS Trillion’s CEO Jang Ki-young signed a contract to transfer management rights and 40 million shares out of his holdings for a total of 30 billion KRW, at 750 KRW per share. The buyers are four corporations: NW Investment Partners (17 million shares), Ace Partners (13.6 million shares), Haesung I&C (4.7 million shares), and RES (4.7 million shares).

Earlier, TS Trillion also announced a plan to raise 40 billion KRW in funds after the market closed on the 20th. This includes a 20 billion KRW third-party allotment capital increase and a 20 billion KRW issuance of convertible bonds (CB). Once the funds are deposited on September 7, the largest shareholder will change to JU Holdings, a corporation established in April with a capital of 10 million KRW.

However, TS Trillion’s stock price showed an upward trend even before the favorable announcements of large-scale fundraising and management rights transfer were made. Specifically, the 20 billion KRW third-party allotment capital increase was announced at 7:18 PM on the 20th, and the 20 billion KRW convertible bond issuance was announced at 7:46 AM on the 21st.

Since the initial announcements were made after the end of after-hours trading on the 20th, the official reflection of the fundraising information in the stock price began on the 21st. Nevertheless, TS Trillion’s stock price started rising from the 16th. After closing lower on the 15th, the stock opened at 623 KRW on the 16th and closed with a 4.5% gain. On that day, only an article about the launch of a new TS Shampoo product was released after market close, with no other significant issues disclosed to the market.

The stock price surge became more pronounced starting on the 19th. TS Trillion’s stock opened 5% higher that day, surged more than 19% intraday, and closed with a 14% gain. Trading volume and value also skyrocketed to 8.46 million shares and 6.2 billion KRW respectively, increasing over 2000% compared to the previous day. On the following day, the 20th, the stock closed at the upper limit price.

On the 21st, when the fundraising plan was officially disclosed, the stock showed significant volatility. It opened 23% higher, fluctuated between the upper limit and around 11% gains during the day, and finally closed with a 17% increase. The closing price that day was 1,126 KRW.

Due to the rapid surge in stock price within a short period, the Korea Exchange announced on the 21st that TS Trillion would be designated as an investment warning stock. This was because the closing price on the 21st had risen more than 60% compared to the closing price five days earlier. Despite this, as the stock price continued to rise, the exchange warned again that trading could be suspended if the price increased further.

CEO Jang Ki-young, Management Rights Acquirers, and Investors in Capital Increase and CB ‘Smile’

With the stock price surging even before the announcement, CEO Jang Ki-young, the corporations acquiring management rights, and investors preparing to subscribe to the capital increase and convertible bonds can already expect capital gains.

First, CEO Jang Ki-young holds an additional 16,908,010 shares besides the 40 million shares sold this time. Including family members’ shares, the total is 27,257,300 shares. Considering TS Trillion’s stock price was in the 600 KRW range, the share value was about 16.5 billion KRW. However, as the stock price exceeded 1,200 KRW on the 23rd, the share value jumped to approximately 33 billion KRW in just a few days.

The buyers of the 40 million shares, having acquired them at 750 KRW per share, are estimated to realize about a 60% profit if the current stock price level is maintained until the shares are transferred. The transaction payment included a 3 billion KRW deposit on the 23rd, with 10 billion KRW due on July 5 and 17 billion KRW on September 4. Also, since the shares were divided among four corporations and structured so that JU Holdings becomes the largest shareholder, if they avoid lock-up restrictions, they are expected to realize profits immediately.

Furthermore, investors in the capital increase and convertible bonds are also expected to gain valuation profits. The subscription price for the 20 billion KRW capital increase is 639 KRW per share, and the CB conversion price is 732 KRW. Acquiring TS Trillion shares and CBs at these prices could yield profits more than double the investment.

An M&A industry insider explained, “Sometimes, when there are no investors, companies decide to raise funds at a low price first and then increase the stock price to attract investors. Nowadays, convertible bonds often have upward repricing (conversion price adjustment), so it is a trend to set a low conversion price at issuance.” Regarding this, a Korea Exchange Market Surveillance Committee official stated, “We are aware of cases where stock prices surge before announcements and monitor the market according to abnormal trading detection criteria.” Meanwhile, TS Trillion did not respond to inquiries about the reasons for the stock price surge before the announcement.