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| JPMorgan Chase headquarters in New York / AFP-Yonhap |
Doubts grow over effectiveness of 'Chinese Wall'
By Park Jae-hyuk
Celltrion, Korea's leading pharmaceutical company, hinted at taking legal action against top-tier U.S. investment bank JPMorgan, by claiming the bank's recent investment reports on the firm defamed its chairman Seo Jung-jin and the company.
Celltrion held an emergency briefing for securities firm analysts here, Thursday, after the company officially raised questions about the credibility of the recent JPMorgan investment reports. The Korea Times reached out JPMorgan for any comments on Celltrion's claim, but received no response.
The possibility came after JPMorgan abruptly accentuated its negative outlook for the Korean pharmaceutical firm.
In the report published by JPMorgan analyst Cho Ji-hyun, Wednesday, the investment bank suggested a reduction of investments in Celltrion shares, setting its target price at 190,000 won ($160), about 60 percent of the previous session's closing price of 318,000 won.
As for Celltrion Healthcare share, JPMorgan set its target price at 70,000 won, about 70 percent of the previous session's closing price of 103,100 won.
JPMorgan said Celltrion's annual earnings growth will peak at 54 percent in 2020 and fall to 21 percent in 2021, warning investors against being too optimistic about its development of potential COVID-19 treatments.
As the stock prices of Celltrion and Celltrion Healthcare respectively dropped 6.13 percent and 4.36 percent after the issuance of the report, the Korean pharmaceutical company claimed JPMorgan seemingly published an "unreasonable report" to undervalue Celltrion, compared to its rival.
In the same report, JPMorgan raised the target price of an ordinary share of Samsung Biologics to 840,000 won from 416,000 won. Samsung Biologics closed at 774,000 won a day before the publication of the report.
"Based on its own estimation of the 2021 earnings, JPMorgan calculated our rival's price to earnings ratio (PER) next year to be 158 times, while Celltrion's to be 76 times and Celltrion Healthcare's 57 times," Celltrion CEO Kee Woo-sung said in a statement. "However, it suggested 'underweight' for Celltrion and Celltrion Healthcare, while proposing 'neutral' for our rival."
Local investors suspected the U.S. investment bank was intentionally trying to drag down its stock price. They said behind its negative outlook was its sales arm, which had conducted a massive amount of short selling of Celltrion shares until the nation's financial authorities imposed a temporary ban on the investment scheme, following the spread of COVID-19 in March. Short selling is an investment move betting on a drop in a stock price.
In contrast to JPMorgan, local brokerages have had optimistic outlooks for Celltrion, saying its growth rate shows there is enough room for its stock price to go up further. According to online financial data tracker FnGuide, Korean securities firms set the target price of Celltrion shares at 371,769 won on average.
Over the past few years, Celltrion has suffered from negative reports issued by foreign investment banks, including Goldman Sachs, Deutsche Bank and Morgan Stanley.
Their reports have been considered to be aimed at short selling of the Korean company shares, although they have emphasized that their "Chinese Wall" strictly bars their research and sales arms from exchanging information with each other.
According to industry officials, JPMorgan accounted for 8.2 percent of short selling of Celltrion shares during the first three months of this year.
A high-ranking executive at a local securities firm wishing to remain anonymous raised doubts whether the Chinese Wall in investment banking are really intact, saying foreign firms here are not under as strict supervision by the financial authorities as domestic firms are.
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