[Click e-Stock] "Limited Passive Supply Shock for Samsung Biologics After Spin-Off"

On October 23, Korea Investment & Securities stated regarding the spin-off of Samsung Biologics, "There is a high possibility that the newly established company, Samsung Episholdings, will be included in the KOSPI 200, so the passive supply and demand shock to Samsung Biologics is expected to be limited."

On this day, Shin Chaerim, a researcher at Korea Investment & Securities, explained, "If the spin-off actually takes place, the market capitalization of Samsung Biologics will decrease by the market capitalization of Samsung Episholdings. However, this decrease in market capitalization is unlikely to trigger selling by index-tracking funds."

On October 17, the proposal for the spin-off was approved at Samsung Biologics' extraordinary general shareholders' meeting. The investment division will be separated from the surviving entity, Samsung Biologics, to establish the new company, Samsung Episholdings. Both the surviving and new entities are scheduled for relisting and change of listing status on November 24. Shin forecasted, "Although Samsung Biologics currently ranks fourth in KOSPI market capitalization, the market impact of a spin-off by a large-cap company will be limited."

She further explained, "When a split event occurs for a KOSPI 200 company, if the new entity ranks within the top 160 in terms of market capitalization among constituent stocks, it can be included in the index on the next trading day after listing. Currently, the expected market capitalization of Samsung Episholdings is 28 trillion won, which could place it within the top 20 of the entire KOSPI. If Samsung Episholdings is included in the KOSPI 200, it would effectively maintain Samsung Biologics' market capitalization, so there is no need for funds to sell their holdings."

Regarding foreign investor flows, she commented, "Companies that have carried out spin-offs typically experience temporary adjustments immediately after the change of listing, while also showing a common trend of net buying by foreign investors. This month, Samsung Biologics has seen a strong buying trend from foreign investors, seemingly reflecting expectations for the spin-off in advance. Although there are concerns about a short-term slowdown in share price growth after the change of listing, the spin-off is positive in terms of strengthening shareholder returns and resolving trading suspension risks."