The issue of capital gains tax for major shareholders has emerged as a hot topic in the securities market. The capital gains tax for major shareholders designates investors with a certain ownership or equity ratio per listed stock that exceeds established thresholds as major shareholders and imposes taxes on their capital gains. During the administration of Yoon Suk-yeol, the threshold for major shareholders was raised from 1 billion won to 5 billion won, but the administration of Lee Jae-myung is working on plans to revert it back to 1 billion won. The market is concerned whether the selling seen at year-end will happen again.
According to the Korea Exchange on the 26th, from 2010 to 2024, individual investors have shown a selling advantage two trading days before the market closing day without exception. This is to avoid becoming major shareholders. The determination of whether to be a major shareholder is based on the last day of the previous business year (for December settlement companies, December 31), and considering the settlement lag of two trading days, the disposal of stocks exceeding the major shareholder's threshold has been repeated.
While a 'Santa rally' in overseas markets typically ushers in expectations for the new year around Christmas, the domestic stock market has actually been identified as facing disturbances.
Since stock investment became active in 2019, the scale of net selling by individual investors two trading days before the market closing day has recorded trillions of won each year. Notably, the scale of selling increased as the stock market strengthened. In 2021, when the KOSPI and KOSDAQ indices surged, fueled by the so-called 'Donghak ants movement,' the total net selling by individuals two trading days before the market closing day reached 3.1587 trillion won.
The scale of net selling by individual investors two trading days before the market closing day decreased from 1.5382 trillion won in 2022, after the capital gains tax threshold for major shareholders was raised to 5 billion won, to 1.016 trillion won in 2023, and further down to 462.7 billion won in 2024. This represents the lowest selling pressure since 2016. Simply put, if the capital gains tax threshold for major shareholders is reverted in a hot domestic stock market like this year, there's a high chance that selling pressure will pour in again at year-end.
To avoid the capital gains tax for major shareholders, individuals must sell even high-quality stocks initially. There are cases where they have to sell cheaply and buy back at a higher price. I analyzed stocks among those that saw significant price increases that year, focusing on those that individuals net sold two trading days before the market closing day and then net purchased the next day.
On December 28, 2021, individuals net sold Wemade shares, which had over a ninefold price increase, for 88.2 billion won, and then net purchased 84.8 billion won worth the next day, on the 29th. The average selling price on the 28th was 177,737 won per transaction, while the average buying price on the 29th was 182,842 won. The average buying price was 2.9% higher than the average selling price.
Let's look at the year 2023, when individual year-end selling pressure was strong. At the time, Alteogen had an annual stock price increase rate of 140%. Individuals net sold 17.3 billion won of Alteogen stock on December 26 and net purchased 5.5 billion won the next day. The average selling price was 90,968 won, and the average buying price was 106,927 won. There was a difference of about 18%.
Similarly, individuals net sold 13.2 billion won worth of ECOPRO BM shares, which saw their stock price triple in 2023, two trading days before the market closing day, and net purchased 26.1 billion won the next day. The average buying price was about 1% higher than the average selling price. In the same year, shares of PharmaResearch and LS Marine Solution also saw the average buying price the day after being higher than the average selling price two trading days before the market closing day. This pattern of selling low and buying back high was repeated.
Above all, there is a growing possibility that individuals' voices will diminish at company meetings. This is also because the date for closing the shareholder register for regular shareholder meetings is based on the last day of the previous business year. As individuals dispose of stocks to avoid becoming major shareholders, their voting rights to be exercised at regular shareholder meetings also decrease. This contrasts with the policy direction of the Lee Jae-myung administration, which aims to strengthen minority shareholder rights through amendments to the Commercial Code.
Considering the size of the stocks held by many individuals, it raises questions about whether 1 billion won is an appropriate threshold for major shareholders. The market capitalization of Samsung Electronics, known as a national stock, currently stands at 390 trillion won, meaning that 1 billion won corresponds to an equity ratio of 0.00025%. Likewise, for Kakao and NAVER, which are widely held, 1 billion won represents an equity ratio of 0.004% and 0.003%, respectively.
Even based on an average market capitalization of 300 billion won (excluding special purpose acquisition companies), 1 billion won equates to an equity ratio of 0.3%. The government states that 10 people must gather to have rights such as making shareholder proposals, viewing accounting records, and requesting the dismissal of directors and auditors. An analyst from a large securities firm noted, "In a situation where the average sale price of Seoul apartments has far exceeded 1 billion won, it raises questions about whether owning 1 billion won worth of shares in a single stock qualifies one as a major shareholder."