The apparel brand SHINSUNG TONGSANG, known for Top Ten and Giordano, announced that it would buy shares at 4,100 won each, the same price as the public purchase offer, as a measure to protect minority shareholders. Minority shareholders are demanding an increase in the purchase price; however, SHINSUNG TONGSANG is maintaining that an increase is impossible, considering fairness for investors who participated in the earlier public offering.
According to the Financial Supervisory Service's electronic disclosure system (DART) on the 5th, SHINSUNG TONGSANG added a protection plan for minority shareholders in a disclosure related to its delisting application on the 1st. If minority shareholders remain after passing the review process of the Korea Exchange following the delisting application, the largest shareholder and related parties will purchase minority shareholders' retained shares at 4,100 won per share for six months from the beginning of the liquidation period.
SHINSUNG TONGSANG conducted two rounds of public purchases for voluntary delisting. During the first public purchase conducted from June to July last year, it acquired shares at 2,300 won each. At that time, 8,456,108 shares were offered in the public offering, raising the equity ratio of related parties, including the largest shareholder, Kanaan, from 77.98% to 83.87%. Then, from June to July this year, it began a second public purchase to buy shares at 4,100 won each. 15,348,498 shares participated, raising the equity ratio of the largest shareholder and related parties to 94.55%.
Kanaan and others secured an equity ratio of 95.38% by purchasing additional shares in the market. They filled the requirements for voluntary delisting (equity ratio of the largest shareholder and others exceeding 95%). SHINSUNG TONGSANG plans to hold an extraordinary general meeting on the 26th to vote on the delisting approval and apply for delisting review on the same day to the Korea Exchange.
The likelihood of SHINSUNG TONGSANG's voluntary delisting plan passing through the Korea Exchange is high. The Korea Exchange focuses on formal requirements when reviewing voluntary delistings, and SHINSUNG TONGSANG has disclosed all conditions related to the sale opportunity for existing investors after delisting and investor protection.
However, remaining minority shareholders (with an equity ratio of 4.62%) insist that the purchase price must be increased. They are demanding a price above 4,920 won per share, which is the price Kanaan paid for SHINSUNG TONGSANG shares in 2021. This implies that they expect some form of "premium" to be guaranteed, similar to the situation where Kanaan bought shares at about 20% higher than the stock price at that time. In particular, the Seoul Metropolitan Police Agency's Financial Crime Investigation Unit recently raided the headquarters of SHINSUNG TONGSANG to investigate whether Kanaan's stock purchase process was appropriate.
Some shareholders have even hinted at legal disputes. If SHINSUNG TONGSANG forces the purchase of remaining shares after the delisting, they are expected to file for a court determination of the stock purchase price.
The problem is that if SHINSUNG TONGSANG raises the minority shareholders' stock purchase price above the second public purchase price, there may be backlash from investors who participated in the public offering. SHINSUNG TONGSANG plans to continue persuading minority shareholders to sell their shares while undergoing the voluntary delisting process.
As the number of voluntary delisting cases increases, conflicts surrounding public purchase prices are repeating. Hanwha 3-WB and Biol are representative cases. Minority shareholders argue that they are not guaranteed fair value while public purchases are conducted at a low stock price.
On the other hand, the corporation asserts that it cannot buy shares at a higher price due to fairness with shareholders who participated in the public offering, stating that it will buy minority shareholders' shares at the public purchase price even after the liquidation. Particularly, some minority shareholders are suspected of being what is termed "squatters", meaning they bought shares anticipating that the public purchase price will rise and are now holding on.