Limit on sales of more than KRW 2 trillion lifted on the 17th
Possibility of a large-scale disposal of the second largest shareholder
Battery stock investment sentiment is also deteriorating
Stock price plummets for a week due to adverse factors
Enlarge photo Eco Pro Pohang Business Site Materials [사진 = 에코프로머티리얼즈]
As the release date for EcoPro Materials’ protected deposit worth over 2 trillion won approaches, concerns about ‘overhang’ (a large amount waiting to be sold) are increasing.
The securities industry predicts that a rebound will be possible by the end of the year due to negative factors such as the worsening performance of the overall secondary battery industry and the emergence of overhang risk.
According to the Korea Securities Depository on the 10th, the protection of 22,482,253 shares of EcoPro Materials, accounting for 32.59% of the total number of listed stocks, will be lifted on the 17th.
At the time of EcoPro Materials’ initial public offering (IPO) on November 17 last year, restrictions on the sale of stocks that were subject to a 6-month mandatory hold condition are imminent. In particular, concerns about a large overhang are putting downward pressure on stock prices as the second largest shareholder, venture capital (VC) BRV Capital Management, is likely to sell a large amount of stock after the mandatory holding is lifted .
BRV Capital Management owns a 24.7% stake (16,855,263 shares) in EcoPro Materials through two managed funds. It is known that BRV Capital, which has been forming the fund for over 7 years, is pursuing a block deal in line with the release of the security deposit.
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In a situation where investment confidence in rechargeable battery stocks has deteriorated, if BRV Capital initiates a block deal with a high discount rate, Eco Pro Materials’ stock price may drop significantly. Due to the influence of double adverse factors, the stock price of Eco Pro Materials decreased by 2.13% from the previous day, ending the day declining for 7 consecutive trading days.
Some argue that the recovery date could be further away as BRV Capital CEO Yoon Kwan is engaged in a legal battle with the National Tax Service over a comprehensive income tax payment.
Representative Yoon is in the process of filing a lawsuit to ‘claim the cancellation of the imposition of comprehensive income tax,’ and if he loses, the tax levied on investment management performance compensation for Eco Pro Materials could increase significantly.
Based on the closing price on the 10th, if BRV Capital disposes of all its holdings, it can achieve a recovery of about 1.7024 trillion won, resulting in performance fees reaching hundreds of billions.
An official in the venture capital industry said, “If we assume a normal situation and calculate the internal rate of return (IRR) of 6-8% as the standard rate of return and 20% of the amount more than the standard return as the performance. fee, the performance fee alone will exceed 300 billion won.” “Of course it can be recovered once the lock (forced retention) is released after the symbol, but the timing may be delayed,” he said.
Meanwhile, stock prices in the secondary battery industry are going downhill due to deteriorating performance. According to the Korea Exchange on the 10th, the rate of return of the ‘KRX Secondary Battery TOP10’ index, which includes major domestic secondary battery stocks, recorded -3.55% this month. This is a low rate of return compared to the 1.35% increase in KOSPI during this period.
LG Energy Solutions recorded an operating profit of 157.3 billion won in the first quarter, but excluding electric vehicle subsidies related to the US Inflation Reduction Act (IRA), it actually had a deficit of 31.6 billion. Ecopro BM’s first quarter operating profit was recorded at 6.7 billion won, down 94% from the same period last year.
The main reasons for the worsening performance are slowing demand for electric vehicles and falling battery prices. Furthermore, uncertainty about the IRA is growing ahead of the US presidential election in November. Former President Donald Trump, a leading candidate, said on the 2nd, “I will repeal the IRA law and the electric vehicle subsidy system on the first day of my term.”
Market expectations are also falling. According to financial information company FnGuide, LG Energy Solution’s second quarter operating profit consensus fell 38% from 481.2 billion won to 297.5 billion won in one month. During the same period, Ecopro BM’s second quarter operating profit forecast was significantly reduced from 42.6 billion won to 400 million won.
Anna Lee, researcher at Yuanta Securities, said, “After bottoming out in the first quarter, top-line-focused performance improvement is expected from the second quarter, but a full sector rebound is expected in the fourth quarter when US presidential election variables resolved. “
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