Executives' selloff hits Coway shares

Woongjin Coway headquarters in Seoul

By Nam Hyun-woo

Woongjin Coway shares have been on a downward slope since late last month after company executives unloaded stock, raising suspicion about Netmarble's bid to acquire Korea's largest home appliance rental firm, according to industry officials Sunday.

Because the sell-off came amid protracted negotiations on selling a controlling stake in the company to the game firm, rumors spread that the deal might have foundered, with the executives selling their shares to avoid potential losses.

Although Woongjin Coway explained the decisions were “personal,” investors dumped the shares, and the share price has since continued to fall.

According to the Korea Exchange, Woongjin Coway's share price shed 7.15 percent of its value to close at 89,600 won Nov. 29, down from 96,500 won, Nov. 25, after four consecutive sessions of declines.

The downturn began Nov. 26, when five Woongjin Coway executives, including Vice President Kim Jong-bae, unloaded a combined 68,918 Coway shares, worth 6.6 billion. Three of the executives sold all their Coway stake.

Although the shares account for less than 0.01 percent of the total, the impact was huge. Woongjin Coway shed 0.41 percent Nov. 26, and showed sharper declines of 1.87 percent Nov. 27, 1.48 percent Nov. 28 and 3.55 percent Nov. 29.

Woongjin Coway CEO Ahn Ji-yong

Woongjin said the controversial move by the executives “was a personal decision that was made during a period allowing its officials to trade the company's shares,” but the explanation failed to prevent rumors among investors.

Some anticipated a management shakeup after the sale to Netmarble while others suspected that the deal might have been canceled and the executives decided to sell their stake to avoid a loss.

In October, Netmarble was named preferred bidder to buy a 25.08 percent stake in Woongjin Coway, which is held by Woongjin Group's education service unit, Woongjin Thinkbig.

Since then, the game giant and Woongjin Group have been negotiating details of the deal, but the talks appear to be stalled. Executives failed to meet their initial schedule of signing a sale and purchase agreement in mid-November and will likely miss the next target to finish the process by the end of this month.

In its bid, Netmarble offered 1.83 trillion won ($ 1.8 billion) for the controlling stake, but is reportedly demanding a discount because Woongjin Coway is in disputes with its union over various issues, including severance pay and the direct employment of contract workers.

“As the takeover process is taking more time than expected, there is concern that the deal is on a bumpy road,” said a domestic finance official. “Such a share sell-off by company executives at a crucial time always sways investors' sentiment.”