In yesterday's post, we looked at the value of the call/put option signed by You

Youngpoong (000670) 2

In yesterday's post, we looked at the value of the call/put option signed by Youngpoong and MBK. Then, after the exercise of the call/put option, what should be the valuation of Youngpoong's 50%-1 share of the total Korea Zinc stake held by MBK and Youngpoong Union?

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When Chairman Choi Yoon-beom enjoyed the dominance of Korea Zinc exclusively, Youngpoong's stake in Korea Zinc was a kind of "dead share." This kind of stake is often observed in other companies. Kumho Oil's stake in former managing director Park Chul-wan or Korea & Company advisor Cho Hyun-sik's stake are similar. It is virtually impossible to sell unless a considerable discount is prepared.

The original property is valuable only when there is possibility of sale regardless of the actual intention to sell. Stocks that are virtually impossible to sell have no specific value other than the value of dividends coming from here. Perhaps that's why Youngpoong wanted to increase his dividend at the shareholders' meeting earlier this year, and Chairman Choi (who wanted to undermine Youngpoong's shareholder value) wanted to reduce it. Korea Zinc's stock price (before the tender offer) was about 400,000 to 500,000 won, but the dividend was 15,000 won. Discounts on assets with a ROE this low are inevitable.

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Things have changed now. According to the management cooperation contract between Youngpoong and MBK, Youngpoong also has the Tag-Along Right and Right of First Refusal for the remaining 50% to 1 share after the call/put option. As a controlling shareholder, you can sell it at a premium equivalent to MBK, or buy a stake in MBK and enjoy complete control.

Its value has changed from a "dead share" to a "share with recognized dominance and premium."

Therefore, Kang Sung-doo, president of Youngpoong, said at a press conference on September 27, "When we sell it in the future, the stock price of (Korea Zinc) will be able to reach 1 million won to 1.2 million won, and I don't think it will be difficult to preserve (investment) if we add a management premium to it."

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MBK Vice Chairman Kim Kwang-il appeared on Understanding to explain the issue.
https://youtu.be/21BNKUNmwvA?si=yyQldJ5vPwvG1Cli

* It is not a recommendation to buy or sell.