Regulators thwart Korean version of 'WallStreetBets'
The GameStop logo in front of the Reddit logo in a February 2021 file photo. Reuters-Yonhap
Anti-short-selling campaign nearly ends in failure
By Park Jae-hyuk
A group of retail investors here have dropped their plans to conduct a mass buying of a certain stock on the Seoul bourse, which was initially supposed to take place this month to protest against short-sellers, most of whom are foreign and institutional investors.
The Korea Stockholders Alliance (KSA) announced Sunday that the decision was made after taking into account the advice from its legal advisers and the predictable scenarios.
“Our campaign has been described as a form of speculation aiming for a short-term margin, and above all, short-sellers' interruptions that rattled the market have created negative public sentiment toward us,” one of the alliance's managers wrote on its website.
The group had tried to emulate U.S. social media platform Reddit's WallStreetBets internet forum users, who sparked a short squeeze of the GameStop stock on the New York Stock Exchange in January through a mass-purchase of the American video game retailer's stocks.
The campaign conducted by retail investors surprised global market insiders at that time, because an unexpected hike in the GameStop stock price caused large losses to several hedge funds that had bet on the price fall.
Inspired by the GameStop short squeeze, the KSA members launched the “K-Stop” movement, opening an internet forum named “kstreetbets.”
The Korea Stockholders Alliance members hold a rally in front of the National Assembly in Seoul in this Feb. 4 file photo. Korea Times photo by Wang Tae-seok
On July 15, they carried out the movement on a trial basis. They decided to buy HLB shares intensively from 3 p.m. that day, given the fact that the short-selling balance of the pharmaceutical company's stock was the highest among the firms listed on the tech-heavy Kosdaq market.
Although HLB's stock price temporarily soared 20 percent during the trading session that day, it started to plummet immediately after 3 p.m., as a large number of investors dumped their shares to enjoy short-term margins. The stock was also designated as an overheated short-selling stock that day, due to a sharp increase in the short-selling volume.
In response, the Financial Services Commission sent a warning on Aug. 1, categorizing such a campaign as a form of illegal trading that could be subject to penalties.
Although the KSA initially said that it would carry out an additional campaign on Aug. 10 without disclosing a target stock to avoid the recurrence of its previous failure, it abruptly made an announcement a few hours before the opening of the Aug. 10 trading session that the second campaign was delayed for “strategic” reasons.
Back then, market observers attributed the postponement to the Korea Exchange's inspection of the KSA. The bourse operator has checked whether or not the alliance's leaders made profits from the campaign.
The KSA emphasized that its war against short-sellers will continue indefinitely through the “autonomous” actions of its members, but its latest decision has been widely seen as a surrender to financial regulators.