[Korea Zinc vs Youngpoong] "If New Shares Are Not Issued, the Loss Falls on Shareholders... Companies with High Returns Must Succeed"

Interview with Lee Sangmok, CEO of Conduit, Operator of Small Shareholder Platform 'Act'

Editor's NoteAfter 75 years of partnership, Korea Zinc and Young Poong are now engaged in a battle for management rights. They are clashing over dividends in shareholder meetings and even resorting to legal disputes to regain control of their affiliate, Seorin Trading. Analysts suggest that the conflict between the two companies stems from a clash of differing management philosophies. The problem is that the dispute between these two companies could harm not only other businesses but also innocent investors. This article aims to examine the multifaceted impact of the conflict between Korea Zinc and Young Poong.

"If the new share issuance is canceled, Korea Zinc’s stock price will plummet. Hyundai Motor withdrawing as a business partner is a huge negative for shareholder value. If it really gets canceled, I wonder what (Young Poong) is trying to achieve..."

Lee Sang-mok, CEO of Conduit, the operator of the small shareholder platform ‘ACT’, said on the 29th regarding Young Poong’s lawsuit against Korea Zinc to invalidate the new share issuance, "90% of individual shareholders will oppose this lawsuit." Last year in September, Young Poong filed a complaint on the 6th at the Seoul Central District Court requesting the invalidation of the new shares issued through a third-party allotment capital increase between Korea Zinc and Hyundai Motor’s overseas joint venture ‘HMG Global.’

Lee said, "Young Poong claims that receiving external investment through third-party allotment or stock swaps from companies like Hyundai Motor, Hanwha, and LG Chem damages shareholder value," adding, "Generally, that might be true, but Korea Zinc’s case is different."

Small Shareholder Platform 'Act' Operator Conduit CEO Sangmok Lee

He explained, "If you ask 100 companies related to secondary batteries whether they would accept investment by giving Hyundai Motor a 5% stake, 99 would say yes." Lee added, "Complete car manufacturers have the authority to decide even on parts," and "From the perspective of a company like Korea Zinc, which handles raw materials and is at the end of the value chain, receiving investment from Hyundai Motor is a good business decision."

He continued, "If, as Young Poong claims, the third-party allotment capital increase with Hyundai Motor was to defend management rights, then Korea Zinc should have sought investment from companies unrelated to its business, like Naver, to enter IT new businesses," and "Korea Zinc has been planning to enter the secondary battery materials business for several years, and its dealings with Hyundai Motor are in line with this strategy."

Lee said, "If Young Poong wanted to oppose, they should have acted immediately last year. They couldn’t have just stayed silent," adding, "Like Hanmi Science, where there was an uproar within a month about ‘why is a pharmaceutical company selling to a chemical company?’ there should have been immediate outcry."

He noted that Korea Zinc is highly regarded in the same industry due to its secondary battery-related business. He said, "To justify a high valuation going forward, the new business must be pursued steadily, so management stability is good from the perspective of individual shareholders." He also said, "Given Korea Zinc’s high shareholder return rate, shareholders consider it a good management team."

Lee founded Conduit, which advocates for small shareholders, after leaving DB Insurance. Last month, he publicly supported Korea Zinc’s dividend policy, saying, "Korea Zinc’s shareholder return rate is 68%, which is a model case we have been looking for." In response, Young Poong pointed out a conflict of interest, claiming that Lee’s statements came from a company entrusted with proxy voting rights for Korea Zinc.

Lee defended Korea Zinc, saying, "We need to be more attentive so that companies that set exemplary shareholder returns are not criticized."