In early trading on the 9th, Cheil Bio is surging 40,000%. Cheil Bio began settlement trading for delisting on this day, and the surge appears to be a "mirage effect" caused by a 1,500-to-1 reverse stock split carried out the same day, making the share price look as if it jumped.
As of 9:30 a.m. on this day, Cheil Bio was trading at 480,000 won on the KOSDAQ market, up 477,920 won (22,976.92%) from the previous session. Earlier in the session, it even traded at 890,000 won, up 42,688% from the previous session.
Earlier, the Korea Exchange (KRX) disclosed that Cheil Bio will be delisted on Feb. 23 after comprehensively considering the corporations' going concern and management transparency. Accordingly, transactions for settlement trading resumed from Feb. 9 to Feb. 20.
Typically, shares plunge on the first day of settlement trading, but Cheil Bio's share price jumped 40,000% on this day. Shareholders are reacting by asking, "Why did the price surge on the settlement trading day?"
This is believed to be due to the 1,500-to-1 reverse stock split Cheil Bio carried out to coincide with the first day of settlement trading. When shares are consolidated, the number of shares in circulation falls, creating a mirage effect that makes the price per share appear higher. Through this split, common shares will shrink from the pre-reduction 29,129,064 shares to 19,419 shares after the capital reduction.
Accordingly, the exchange will newly calculate the post-split reference price to reflect the pre-split price level. A simple calculation applying the split ratio (1,500) to the previous session's closing price (2,080 won) yields about 3.12 million won per share. If this is actually reflected, the share price did not soar 40,000% but rather fell.
Meanwhile, Cheil Bio also began buying back its own shares on this day. Cheil Bio said it will purchase up to 194 shares per day, for a total of 1,940 shares (about 2.02278 billion won), on the open market starting this day. The purpose of the acquisition is to protect shareholders and enhance shareholder value.