Sold All Shares Worth 15.5 Million Won... Why Did a Lotte Affiliate Executive Choose That Timing?

Lotte Property & Development Executive Sells All 120 Shares on August 1
Nine Days After Shin Youngja, Lotte Foundation Chairwoman, Disposes of Her Stake
Explains: "Sale Was for Personal Financial Reasons"

An inside director of a Lotte Group affiliate has sold all of their shares in Lotte Chilsung Beverage this month. This follows the complete divestment of Lotte Chilsung shares by Shin Youngja, Chairwoman of the Lotte Foundation and eldest daughter of the late Lotte Group founder Shin Kyuk-ho. With Lotte Chilsung’s second-quarter earnings announcement imminent and domestic demand sluggishness clearly reflected in its performance, attention is focusing on the reasons behind the executive’s decision to sell all their shares.

According to the Financial Supervisory Service’s electronic disclosure system on August 12, the head of division A, an inside director at Lotte Property & Development, sold all 120 shares they owned in Lotte Chilsung Beverage through an on-market transaction on August 1. The selling price per share ranged from a low of 127,200 won to a high of 131,400 won, with the total sale amount estimated at around 15.5 million won.

Under the Financial Investment Services and Capital Markets Act, major shareholders or executives of listed companies are required to report their holdings and any changes in stocks and certain securities in order to prevent insider trading based on undisclosed corporate information.

Head of division A was promoted to executive director in the 2023 regular executive reshuffle at Lotte Group and purchased Lotte Chilsung Beverage shares on July 27 of the same year. At that time, the purchase price per share ranged from a low of 117,300 won to a high of 121,700 won, totaling roughly 14 million won. After holding the shares for just over two years, the estimated profit from the sale is around 1 million won.

The timing of the sale by head of division A is drawing particular attention. The executive sold all shares just one trading day before Lotte Chilsung’s second-quarter earnings announcement. Previously, on July 11, Lotte Chilsung had announced via a preliminary disclosure that it would release its second-quarter results on August 4.

Lotte Chilsung’s disclosed second-quarter results for this year showed operating profit of 62.3 billion won, up 3.5% year-on-year, driven by the performance of its global operations in the Philippines and Myanmar. During the same period, sales fell 1.1% to 1.0872 trillion won, but profitability exceeded market expectations of around 60 billion won. On the day of the earnings announcement, Lotte Chilsung’s share price rose 3.45% to close at 134,800 won.

However, the next day the share price dropped by 2.15%, and on August 6 it fell by nearly another 2%. Although there was a brief rebound, the stock declined for three consecutive days, closing at around 125,000 won on August 12. This was due to domestic demand weakness, which led to declining sales in both the beverage and liquor businesses in Korea.

In fact, during the second quarter, which is considered peak season, all segments of Lotte Chilsung’s beverage business except energy drinks experienced negative growth. Juice sales in particular fell by nearly 20%, while bottled water and sports drinks declined by more than 10%. The liquor business also saw beer sales drop by over 30%, resulting in a year-to-date growth rate of nearly minus 40%.

Previously, Chairwoman Shin Youngja sold her entire stake (247,073 shares) in Lotte Chilsung Beverage through a block deal on July 24. Citing the need to pay inheritance tax, she recently disposed of all her shares in Lotte Chilsung, Lotte Corporation, and Lotte Shopping. These companies have all seen their share prices fall recently amid poor earnings.

Lotte Group has traditionally encouraged executives and employees to hold shares in affiliates as part of responsible management. In the case of Lotte Chilsung, Vice Chairman Lee Younggu (930 shares), CEO Park Yoonki (1,100 shares), Head of Sales Division 3 Na Hanche (343 shares), and CFO Song Hyojin (250 shares) all hold company shares. Last year, when a liquidity crisis hit Lotte Group’s chemical businesses, 127 executives from Lotte Chemical, Lotte Fine Chemical, and Lotte Energy Materials purchased company shares.

However, it is unusual for executives or employees to sell company shares during their tenure. This is the first time this year that a Lotte Group executive has sold Lotte Chilsung shares on the open market. Through Lotte Property & Development, head of division A stated, “I sold my Lotte Chilsung shares because I needed funds for personal reasons, such as serving as a director,” cautioning against overinterpretation.