Shares of Korea Zinc, the world’s largest zinc refiner, saw a significant drop for the second consecutive day on Thursday, sparking investor concerns and drawing scrutiny from regulators. The decline comes as Korea Zinc announced plans to issue new shares worth approximately $1.8 billion, a decision analysts and investors criticized as one that could dilute shareholder value and intensify the ongoing power struggle within the company.
As the stock plunged by as much as 23.2% in morning trading on Thursday after reaching a 29.9% decline the day before, Korea Zinc finds itself at the center of a fierce battle between its founding families for control. Just two days prior to the announcement, the company had completed a share buyback at a higher price, adding to the confusion and sparking frustration among shareholders and financial analysts alike.
By 0038 GMT on Thursday, shares of Korea Zinc had declined 15.1% and hit daily trading limits in consecutive sessions, alarming investors and pushing market regulators to take notice. Wednesday’s announcement, regarding the issuance of new stocks, came as a shock, given that Korea Zinc had recently initiated a buyback. The buyback was seen as a positive signal, suggesting that the company valued its stock at a premium. However, the decision to issue additional shares so soon afterward left investors questioning the company’s motives.
Analysts voiced concerns that issuing new stock could dilute the value of existing shares and expressed frustration at the mixed messaging coming from Korea Zinc. “This move sends conflicting signals to the market,” said Lee Jin-woo, a financial analyst at Mirae Asset Securities in Seoul. “Share buybacks typically signal a commitment to shareholder value, so issuing new shares shortly after creates confusion and undermines that value.”
At the heart of the controversy is an ongoing battle for control between two factions of the company’s founding family. Korea Zinc, originally a family-owned business, is now a publicly listed entity. However, legacy ties remain strong, and family influence is still a major factor in its strategic direction. The issuance of new shares, some analysts argue, may be a strategic move by one faction to solidify its power by increasing its share of ownership. This strategy, if true, could allow the faction in control of the issuance process to gain a controlling share, effectively sidelining the other family faction.
The market’s reaction has been notably adverse, with analysts cautioning that the power struggle could erode Korea Zinc’s market value in the long run. “The family feud appears to be clouding sound corporate governance and affecting Korea Zinc’s decision-making processes,” said Min Jae-hoon, a corporate governance expert. “Investors are naturally concerned when internal disputes seem to take precedence over shareholder interests.”
The volatility in Korea Zinc’s shares has attracted the attention of South Korea’s Financial Supervisory Service (FSS), which is expected to hold a briefing later on Thursday to address the broader market impact of the situation. The FSS had already launched a probe into tender offers made by the rival factions earlier in October. The watchdog expressed concern that the parties might engage in unfair practices that could destabilize the market further, cautioning both sides to act responsibly.
FSS spokesperson Lee Soo-jin emphasized the importance of transparency and adherence to fair practices, especially when it comes to a company of Korea Zinc’s market size and influence. “Given Korea Zinc’s prominent position in the global zinc refining market, any significant action or controversy around its stock will inevitably impact a wide array of stakeholders,” she said.
The briefing is expected to address concerns around corporate governance, shareholder rights, and the potential for further regulatory intervention if the power struggle continues to unsettle the market. Investors are hopeful that the FSS will enforce stricter oversight to prevent any further actions that could harm Korea Zinc’s share value or reputation.
As the world’s largest zinc refiner, Korea Zinc plays a pivotal role in the global metals market. Zinc is an essential raw material used in galvanizing steel and is in high demand from industries ranging from automotive to construction. Any instability within Korea Zinc can have ripple effects on the broader zinc market, potentially impacting prices and supply chains.
Global commodity markets responded cautiously to the news, with zinc prices experiencing mild fluctuations. While no major supply disruption is currently expected, analysts are closely monitoring the situation, especially if Korea Zinc’s internal struggles begin to affect its production capacity or financial stability.
“Given Korea Zinc’s significant production capacity, any instability has the potential to disrupt zinc markets, especially if the company faces financial pressures due to its governance issues,” said Alexander Hsu, a commodities expert with a focus on metals.
Investor sentiment has taken a marked downturn as shareholders question the management’s handling of the situation. The decision to issue new stock so soon after a buyback has raised concerns that Korea Zinc may not be prioritizing shareholder interests, particularly if the new issuance dilutes the holdings of current investors.
In response to the backlash, Korea Zinc released a statement defending its decision, stating that the issuance of new shares was intended to “strengthen the company’s financial standing and fund strategic initiatives.” However, the company did not clarify why this issuance was not foreseen before the recent buyback or how these funds would be deployed.
The lack of clear communication has only heightened investor mistrust, as many worry that their interests are being compromised in favor of family disputes. “This lack of transparency is troubling,” said Hwang So-yeon, a retail investor who owns shares in Korea Zinc. “It feels like the company’s leadership is not being upfront about its priorities, and that’s worrying for anyone who holds stock in Korea Zinc.”
Analysts are divided on what this development means for Korea Zinc’s future. Some believe that the issuance is a short-term measure that will stabilize the company’s financials, while others argue that the power struggle could lead to longer-term instability.
A report from Hana Financial Group noted that, while Korea Zinc remains financially robust, the ongoing family feud might weigh on the stock in the short to medium term. “As long as the two factions are at odds, investors can expect a certain level of volatility in Korea Zinc’s share price,” the report stated. “The issuance of new shares has added fuel to the fire, and it remains to be seen whether the FSS will step in to enforce a more structured approach.”
