Block deals of Korean stocks surge ahead of tighter regulation

Block trades of South Korean listed shares have surged by six times so far this year from the same period in 2023, according to the Financial Supervisory Service (FSS) on Sunday. Shareholders rushed to sell their stocks as regulations on block deal disclosures will be tighter in July, which could slash stock prices by the time of selling.

A total of 4.82 trillion won ($3.5 billion) worth of listed shares was sold in block trades from Jan. 2 to May 16, according to FSS data. Samsung Group family divestments of shares in some group affiliates made up about 65.2% of the block deals. 

The block trades soared about six times from 687 billion won worth of sales for the first five months of last year.

Market insiders said that key shareholders of listed firms completed their block deals earlier this year before the implementation of the amended Capital Market Act, which will oblige them to disclose plans to sell 1% or more stake in a company at least 30 days before the transaction to protect minor shareholders from heavy losses. The revised law will be effective from July.  

Major shareholders rushed block deals as they expected that share prices would start declining after such disclosures and could result in few capital gains or even losses when the securities were sold, market insiders added.    

So far this year, the majority of the block trades on the main Kospi were led by conglomerate family owners who needed cash for inheritance or gift taxes.

Samsung Group heiress and Hotel Shilla Chief Executive Lee Boo-jin sold 441.2 billion won worth of Samsung Electronics Co. shares in a block deal in April to pay her inheritance tax. The unloaded shares represented 0.09% of the outstanding shares in the tech giant. 

In January, Lee, her younger sister and Samsung Welfare Foundation Chair Lee Seo-hyun and their mother Hong Ra-hee sold 2.8 trillion won worth of shares in Samsung Group affiliates, comprised of 2.2 trillion won worth of Samsung Electronics stocks and 558.6 billion won worth of combined Samsung Life Insurance, Samsung SDS Co. and Samsung C&T Corp. shares.   

The Samsung family’s block sales came after the ex-chairman Lee Kun-hee’s death in October 2020. He left an inheritance worth 26 trillion won and 12 trillion won in inheritance tax, and the bereaved family has been paying the tax in installments over five years, starting in April 2021. 

SK Group’s information tech and hospitality services arm SK Networks Co. Chief Operating Officer Choi Sung-hwan cashed in 44.7 billion won last month by selling 6.71 million shares in SK Networks and 85,204 stocks in the SK Group’s holding firm SK Inc.

Choi said he sold the shares to pay a gift tax as Chey Tae-won, SK Group Chairman and Choi’s uncle, gifted the COO 134.6 billion won worth of the holding company shares in 2018.

SeAH Group’s Chair Lee Soon-hyung and Vice Chair Park Eui-sook, the steel major’s family members, together sold a 9.3% stake in the holding company SeAH Holdings Corp. for 35.7 billion won last month. The reason for the block sale was not disclosed.

Game developer Netmarble Co. divested of a 6% stake in K-pop sensation BTS’ agency HYBE Co. for 530 billion won to secure liquidity last November.

Kumyang Co. Chairman Ryu Kwang-jy unloaded a 4.55% stake in the chemical blowing agent maker for 243.9 billion won earlier this month.

Among the junior bourse Kosdaq-listed firms, biotech Alteogen Inc.'s co-founder Chung Hye-shin divested of  a 3.07% stake for 316.4 billion won in a block sale.

L&P Cosmetic sold a combined 51.3 billion won worth of beauty products maker Manyo Co. earlier this year.

Write to Jeong-Cheol Bae at bjc@hankyung.com

Jihyun Kim edited this article.