LG-Google rumor spreads

A rumor that Google would acquire a 35 percent stake in LG Electronics to become its top shareholder sent LG shares on a roller coaster ride on Wednesday.

LG Electronics’ PR team did not even write a press release to deny the rumor.

It was “just too preposterous to mention,” according to a spokesperson.

The rumor was classic jjirashi, a slang word derived from Japanese that denotes rumors consumed and spread by brokerage houses. It started to spread around 11 a.m. Wednesday.

“Google will participate in LG Electronics’ smartphone, Internet of Things and driverless car projects as a strategic investor and won’t acquire management rights,” read a rumor spread on mobile messenger services.

LG Electronics shares shot up by as much as 14.52 percent in just 40 minutes. Trading of its shares was so robust that they accounted for almost 4 percent of the entire trading volume on the Kospi yesterday.

But the upward momentum slackened after LG Electronics President Cho Sung-jin, who was launching a new washing machine, was asked about the Google rumor, telling reporters he “has never heard of it.”

Shares closed at 43,650 won ($37.5) on Wednesday, 3.07 percent up. By the end of trading Thursday, they were down 1.95 percent to 42,800 won.

LG and Google have maintained a strategic partnership in LG’s Android smartphones and Google’s fourth- and fifth-generation Nexus smartphones.

Wednesday’s almost hopeful rumor reflects how vulnerable the country’s second-largest electronics producer has become amid dwindling sales of smartphones and TVs.

“Google’s takeover of LG Electronics was definitely a rumor,” said the head of a research center at a Seoul-based securities firm who asked to remain anonymous. “But it seems to come from the fact that LG’s smartphones are showing no signs of recovering from their poor performance.”

Analysts forecast the world’s fifth-largest smartphone vendor, which trailed China’s Xiaomi by shipments as of the end of June, saw its second-quarter operating profit tumble almost 50 percent year-on-year to 309.4 billion won on much worse-than-expected sales of its flagship G4 smartphone. Launched in late April, G4s have sold a mere 300,000 units domestically.

Its predecessor, the G3, sold over 10 million worldwide.

LG Electronics shares have almost halved in the past year.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]