In March 2021, Seo Jung-jin, the honorary chairman of Celltrion, declared his retirement, stating, “If there are any deficiencies in management, I will be prepared to play a firefighter’s role.” However, just two years later, in March of this year, he made a surprising announcement of his return to business management.
Since his return, Honorary Chairman Seo took on the role of a firefighter in the challenging situation that Celltrion was facing at the time. In August, he held multiple online briefings and announced the merger between Celltrion and Celltrion Healthcare. To address the uncertainties surrounding the merger, he appeared in person at an extraordinary shareholders’ meeting on Oct. 23 and held a press conference in Seoul just two days later on Oct. 25.
However, the so-called “Seo Jung-jin Magic” seems to have lost its effect. On that day, Celltrion's stock price started at 149,400 won (US$110.34), experiencing a 0.47 percent decline. Shortly after the press conference, it briefly rebounded to 150,400 won, but in the afternoon, it slipped down to 149,500 won, closing at 150,100 won. This contrasts with the vertical increase in Celltrion’s stock price from the 140,000 won to 180,000 won in just one month since Chairman Seo’s return in March this year.
Chairman Seo’s decision to hold this press conference is primarily aimed at bolstering the stock prices of Celltrion and Celltrion Healthcare. Celltrion has set the exercise period for stock purchase rights to be Nov. 13, as the merger proposal was approved. Stock purchase rights are an entitlement for shareholders opposing the merger to demand their shares to be bought back by the company at a fair price. If the stock price falls below the stock purchase rights’ reference price during this period, it would be advantageous for investors to exercise these rights.
Although the merger plan passed with a 97.3 percent approval rate at the recent shareholder meeting, concerns were raised about the National Pension Fund, which holds a 7.4 percent, or 10,877,643 share, stake in Celltrion. The National Pension Fund abstained from voting on the merger plan, leaving open the possibility of exercising its stock purchase rights. Assuming that the National Pension Service exercises its rights for all the shares it holds, the company would need 1.64 trillion won in cash. When combining all of the liquid assets of Celltrion and Celltrion Healthcare, the total is just about 1 trillion won. On that day, Celltrion’s stock closed at 150,100 won, which fell short of the stock purchase rights’ exercise price of 150,813 won.
Over the past month, both Celltrion and Celltrion Healthcare’s stock prices have been struggling. Even after announcing the approval of the product by the U.S. Food and Drug Administration (FDA) for the biosimilar drug, Remsima SC, known as Zymfentra in the U.S., on Oct. 23, the stock prices closed lower. Interestingly, there have been posts in the Celltrion stock discussion forums encouraging small shareholders to buy shares.
Celltrion’s inability to rebound in stock price is primarily due to the fact that the short-term effects of the merger are not yet evident. Celltrion explains that it can improve its cost-to-revenue ratio, secure cost competitiveness, and expand market share by streamlining overlapping businesses resulting from the merger. However, market analysts believe that such synergies may only become apparent by the year 2025.