Daedong Metals is trading at the upper limit of the daily price range on the 10th on the ex-rights date effect of a bonus issue.
As of 9:53 a.m. that day on the KOSDAQ market, Daedong Metals was trading at 7,020 won, up 1,620 won (30%) from the previous transaction day.
It is interpreted that the stock price surged on the ex-rights date effect of a bonus issue. The ex-rights date for a bonus issue is the day when the right to receive new shares disappears, and the Korea Exchange (KRX) artificially adjusts stock prices that day in line with the bonus issue ratio.
Accordingly, after closing at 10,790 won the previous day, the stock resumed trading with the reference price reflecting the ex-rights date lowered to 5,400 won. As the reference price fell, a buying trend flowed in on the illusion that the stock looked cheaper.
Earlier, on the 27th, Daedong Metals said it decided on a bonus issue allocating one new common share for every one existing share. The goal is to enhance shareholder value and increase the number of shares in circulation. The total number of new shares is 3,189,166, with Apr. 13 as the record date for the allocation and May 7 as the scheduled listing date.
Nam Gil-nam, a research fellow at the Korea Capital Market Institute, said, "On the ex-rights date for a bonus issue, there is a strong tendency for bargain hunting to flow in due to an optical illusion that the stock looks cheap as the reference price falls," and added, "In particular, the higher the bonus issue ratio, the larger the price adjustment range from the ex-rights date, strengthening buying momentum."
However, some note that a bonus issue is merely an accounting adjustment unrelated to changes in a company's fundamentals, so caution is needed when investing. Nam said, "A bonus issue is not a factor that changes a company's intrinsic value, but a formal adjustment due to an increase in the number of shares," adding, "Exercise caution in investment decisions."