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Celltrion rides high on prospect of Kospi move

Sept 22,2017
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As Celltrion, the drug maker that stands atop the Kosdaq board, mulls a move to the Kospi, shares of the biopharmaceutical company have been bullish.

Up until Wednesday, the stock’s value has been reaching new heights, rising more than 30 percent in a single month. On Thursday, shares fell nearly half a percent to close at 146,000 won ($128.84), but the dip might prove to be a blip as shareholders are scheduled to meet next Friday to decide whether Celltrion is ready to graduate to the Korean market’s main bourse.

“There’s been continual purchases by foreign and institutional investors ahead of the Celltrion shareholders meeting,” said Han Byung-hwa, an analyst at Eugene Investment & Securities.

Celltrion’s Kospi ambitions began last month, when a group of minority shareholders filed a petition demanding the company list on the Kospi to prevent damages caused by short selling, which is more common on the Kosdaq.

“If Celltrion is traded on the Kospi and later gets into the Kospi 200, it will have much larger exposure to foreign and institutional investors, and this will make it much easier for the company to attract investment,” said Eom Yeo-jin, an analyst at Shinyoung Securities. “It will likely lower the risks of the company’s stock value falling due to short selling.”

The Kospi 200 is an index that shows the real-time stock quotes of the country’s top 200 companies. In order to get into the club, the newly listed stock only needs to remain within the top 50 by market capitalization for 15 trading days.

Celltrion’s market capitalization currently stands at 17.9 trillion won. The market estimates that if it moves to the Kospi, it will be ranked 17th, slightly behind SK Corporation with 18.9 trillion won and above major players like SK Innovation (17.5 trillion won), Samsung SDI (14.6 trillion won) and even cosmetics giant AmorePacific (14.5 trillion won).

“The recent increase in Celltrion’s stock prices largely came from the prospects of relisting on the Kospi,” said Shin Jae-hoon, an analyst at eBest Investment & Securities. He added that favorable sales of the company’s autoimmune disease treatment Remsima in Europe as well as net buying by foreign investors have contributed to the boost.

Short selling has been a major concern for Celltrion, whose minority shareholders have often been victims of the practice. The market estimates that more than 50 percent of shareholders are minority investors. Last year, they accounted for 66 percent.

In short selling, an investor borrows shares and then sells them in order to force the value to drop. Once it goes down, investors repurchase that same stock at a lower price.

When compared to other stocks that go through short selling, Celltrion is a frequent victim. Last year, short selling on average accounted for 7.5 percent of all Celltrion stock trades, according to data from the Korea Exchange, compared to 2 to 3 percent at other Kosdaq companies. In 38 sessions last year, the stock saw short selling exceed 15 percent, the limit at which authorities considered short selling to be “excessive.”

Last month, the government announced stronger regulations against short selling, including suspension of transactions on stocks suspected of undergoing “excessive” short selling. The bar for “excessive” has also been lowered to 12 percent.

Still, short selling at Celltrion persists. Between Aug. 1 and Sept. 15, the amount of stock that underwent short selling increased to 1.4 trillion won from 1.2 trillion won.


BY CHO HYUN-SOOK, LEE HO-JEONG [lee.hojeong@joongang.co.kr]