Celltrion CEO to sell out controlling stake
By Kim Tae-jong
Seo Jung-jin
Celltrion Chairman and CEO Seo Jung-jin said Tuesday he will sell his entire controlling stake in the firm to a multinational pharmaceutical company to protect the firm from short-selling by speculative investors.
“I can’t see the firm and minority shareholders suffering from the attack by abusive short-selling investors,” Seo said in a news conference at the 63 Building in Yeouido, Seoul. “We will find a new (major) shareholder as early as in May or in June at the latest.”
Seo has a 30-percent stake in Celltrion, a 35-percent stake in Celltrion Pharm and a 50-percent stake in Celltrion Healthcare.
After the sale of his stakes, the major shareholder of the nation’s largest biotech company on the tech-laden junior KOSDAQ bourse in terms of market capitalization will be a foreign pharmaceutical firm.
Seo said he decided to give up his rights to root out abusive short-selling that has damaged the firm and minority shareholders for the past two years, also criticizing the lack of protection from the financial authorities.
The biopharmaceutical firm has been under attack from investors who deliberately distort prices by spreading false information and gain profits through short-selling. The portion of short selling in the firm’s overall stock transaction has been much higher than those at other firms. Of 432 trading days in the past two year, the firm saw short-selling of its stocks for 412 days. In all, short sellers sold more than 8 million shares in 2012 alone.
“The portion of short-selling once stood at 35 percent, but the authorities did nothing,” Seo said. “The short-selling practice exists in all stock markets, but Korea has a very poor system to monitor and supervise whether it works properly.”
He urged the authorities to strengthen the monitoring system to regulate abusive short-selling, expressing his hope that his decision will serve a turning point to reform the regulation on short-selling.
“It is not a decision that I can reverse. I strongly hope that this can provide a chance for the nation to reconsider the short-selling system on the KOSDAQ,” he said.
He further expressed his bitterness by saying, “The sales of the shares to a multinational firm would be beneficial to the company but it is a big loss for the nation.”
After he steps down from the major shareholder position, he will work hard to make good environments under which a second and third Celltrion-like business can be established, he said.
Short selling refers to the practice that sees investors borrow shares from brokerage houses or other investors and sell them in the relevant market hoping the price will fall. The aim is to buy back the asset at a lower price and return it to its owner, while pocketing the difference. This is often blamed for contributing to market volatility in times of testiness.
The government only imposes a temporary ban on short selling when the market is on the verge of being extremely volatile due to internal and external risk factors such as the fallout of the Lehman Brothers implosion and the explosion of eurozone debt crisis.