Naver, which exchanged its equities with Mirae Asset Daewoo for a strategic partnership, is in a dilemma over Mirae Asset Daewoo’s capital increase. After making an investment in each other’s equities, the price of Mirae Asset Daewoo shares decreased due to numerous unfavorable factors. However, it is difficult for Naver to turn its eyes from Mirae Asset Daewoo’s capital increase as a major shareholder.
According to investment banking industry sources on January 18, Naver is considering whether to participate in 700 billion won (US$653.9 million) of Mirae Asset Daewoo’s capital increase. As Naver invested 500 billion won (US$467.07 million) in Mirae Asset Daewoo’s shares in June last year, it has become the fourth largest shareholder with a 7.1 percent stake after Mirae Asset Capital with a 21.8 percent stake, Mirae Asset Daewoo treasury stocks with a 16.6 percent stake and National Pension Service (NPS) with a 8.6 percent stake. The treasury share doesn’t have the voting rights and the NPS is a financial investor who doesn’t engage in management. Therefore, Naver is practically the second largest shareholder after Mirae Asset Capital.
Naver bought Mirae Asset Daewoo treasury shares at 10,550 won (US$9.86) per share on June 26 last year to strengthen the partnership for the digital financing service sector. However, the price of Mirae Asset Daewoo shares fell 17.4 percent for two trading days to some 9,000 won (US$8.41) as the Fair Trade Commission (FTC) launched a probe in Mirae Asset Daewoo on December 15 last year. With the bullish KOSDAQ market and expected benefits from stocks in securities sector, the price of Mirae Asset Daewoo shares rose to 10,050 won (US$9.39) as of January 18. However, Naver still shows a loss of 23.6 billion won (US$22.05 million) compared to its purchase price. On the other hand, Mirae Asset Daewoo bought Naver treasury stocks at 888,000 won (US$829.52) and shows a profit of 8.4 billion won (US$7.85 million) as the price went up 1.6 percent to 903,000 won (US$843.53) as of the 18th. In terms of stock price alone, Mirae Asset is the one who made money from eight months of the strategic alliance.
Mirae Asset Daewoo and Naver exchanged their equities to not only cooperate in digital financing business but also improve their governance structure. When they exchange treasury stocks which don’t have the voting rights, their voting rights will revive. Moreover, Mirae Asset Daewoo needed to increase its equity capital to become a mega IB and its treasury stocks went against equity capital calculation.
Naver, which is making a loss in stock prices, is considering whether to help increase 700 billion won (US$653.9 million) of capital for Mirae Asset Daewoo to make a mega IB. It is normal for Naver to participate in Mirae Asset Daewoo’s capital increase as a major shareholder but Naver still needs to think thoroughly if it is a lucrative business in the perspective of capital utilization. In addition, the fact that Mirae Asset Capital, the largest shareholder of Mirae Asset Daewoo, cannot take part in the capital increase in accordance with its stake is a burden on Naver. Mirae Asset Capital should increase 122.8 billion won (US$114.71 million) of capital according to its stock holdings but its stake in other subsidiaries cannot exceed 150 percent of equity capital under the current Specialized Credit Financial Business Act.