Celltrion mulls move to Kospi

Drug maker Celltrion, the largest company by capital listed on the Kosdaq, will begin discussions about moving to the bigger Kospi index after shareholders requested the transfer because of the company’s vulnerability to short sellers and apparent devaluation on the Kosdaq.

The company said Thursday that over 3 percent of shareholders made the request. An extraordinary shareholders meeting will likely be held next month to discuss the issue after it gains approval from the company’s board of directors.

Celltrion has long been a major target of short sellers because the company, by its nature as a pharmaceutical, is susceptible to market fluctuations.

Short selling refers to the sale of a security that the seller does not actually own, and is made based on the assumption that a security’s price will decline and be purchased later at a lower price to gain the price difference. Therefore, minority shareholders, usually retail investors, often fall victim most to the scheme.

Shareholders believe a transfer to the Kospi will help fend off short sellers and draw in more reliable institutional investors. Since 66 percent of Celltrion’s stock is held by minority shareholders, the chances that shareholders will approve a transfer are reasonable. Another 22 percent is held by Celltrion Healthcare, the marketing subsidiary of Celltrion, and other affiliated people including executives.

The announcement on Thursday kept the Korea Exchange on alert because the departure of the Kosdaq’s top company will further increase the gulf between the Kospi and Kosdaq.

Kim Jae-joon, president and CEO of the Kosdaq market at the Korea Exchange, met with Celltrion’s chairman, Seo Jung-jin, on Monday to dissuade him from the transfer, a spokesperson for Korea Exchange confirmed.

A source at the Korea Exchange said that it was working to change regulations on short selling to protect listed companies. Other major players on the Kosdaq have defected to the Kospi, the most recent being Kakao, operator of the country’s most popular messaging app. It left the Kosdaq last month even though it was the second-largest company on the bourse.

“We are considering different ways to reflect the accurate valuation of Kosdaq stocks,” the source said. “Nothing is decided yet, but one possible way is to include larger Kosdaq stocks in the Kospi 200 index so that they are exposed to more reliable investors.”

The source said the tougher short selling regulations will likely come next week.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]