From the day after Gun-Ho sold his Dyeon Korea’s stock that he had purchased using Seung-Hee sister’s stock account, the stock price started going down. The stock manipulators seemed to still try to raise the price at first, and then they eventually threw all of their Dyeon Korea’s shares to the stock market. The little people, who missed the opportunity to sell their stocks before the price started going down, cried out loud.
An economic newspaper covered the latest changes with Dyeon Korea’s stock price.
[Dyeon Korea’s stock price is going downwards again after having previously experienced a substantial increase in value for the past several weeks. The price had increased excessively before it dropped today, and the recent fall in value is attributed to the subsequent profit-taking. The price kept falling to its lower limit for the day right until the investors loaded with a substantial amount of funds came in and bought a significant amount of the shares; it happened 5 minutes before the market closed. They successfully raised the stock price, and when the market closed, Dyeon Korea’s stock price dropped only by 17%.]
[Stock market experts expect to see more price drops and maybe a little bit of increases for a while before it could actually rebound. However, as Dyeon Korea’s financial statements and its growth rate are clearly showing that the company’s business is doing great regardless of the recent fluctuation in its stock price, the experts are positive that its stock price will eventually go up.]
Gun-Ho withdrew the funds of 10.6 billion won from Seung-Hee sister’s stock account and deposited the funds in his personal bank account.
The news coverage about the primary election for the leader of the political party—Gongmyeong Party—appeared on the internet. Gun-Ho usually wouldn’t read political news, but since the news was related to Minister Jin-Woo Lee, he clicked the news title to see the contents.
[Gongmyeong Party has 9 candidates who will be competing with each other for the position that will be leading the party. 3 candidates will be on the final list. As the competition for the party leader heats up, it is drawing public attention.]
“Minister Jin-Woo Lee’s name is on the list with 8 other candidates, and there are more than 500 voters who will be participating in this election. I wonder how it works. Hmm, they are using a cut-off method. The candidate, who doesn’t gain a certain score, will be eliminated from the competition. It’s like a golf competition.
Half of the candidates are well-known people. Minister Jin-Woo Lee served the country as a member of congress several times, and he also worked as a minister at the government. I’m certain that he will be easily on the final list with 2 other candidates. But, I’m worried about the competition after that.”
As he was turning off the computer, Gun-Ho thought that he would better go on a trip to Japan to visit Mr. Sakata Ikuzo in Yokohama City, with Jong-Suk Park since he had no urgent or important matters for now that required his full attention.
When he was about to give a call to GH Machines’ President Jong-Suk Park to schedule for the trip, he received a call from A Group. It was CEO Park at A Group’s planning and coordination department.
“Mr. President Goo, how have you been?”
“Oh, Mr. CEO Park, how are you?”
“How is GH Mobile doing with sales these days?”
“The sales have increased, and I thank you for your help.”
“Do you think the company will make 200 billion won now?”
“Well, I can’t tell for sure until I see the year-end financial documents, but I think 200 billion won would be difficult to achieve, but we will make an annual sales revenue of 180 billion won comfortably though.”
“Hmm, is that so?”
“It’s too early to have last quarter’s earnings yet. If you want, I will inform you once the documents become available.”
“According to the Financial Supervisor Service’s DART (Data Analysis, Retrieval, and Transfer System), GH Mobile achieved net earnings of 5.85 billion won last year.”
“That’s correct. Our net profit ratio is more or less 5%.”
“Can I expect to see the same net profit ratio this year as well?”
“I believe so. As you well know, it’s hard for a manufacturing company like us to make a high net profit ratio.”
“Assuming the company makes 200 billion won for the year, the profit would be about 10 billion won. If it makes 180 billion won, the profit would be 9 billion won.”
“That sounds correct.”
“What’s your plan with distributing dividends? You don’t think that you would be able to distribute 100% of the profit, do you?”
“Well, GH Mobile still has a financial debt of 45 billion won. We will have to repay at least a part of the debt first. Therefore, the amount that will be available to be distributed to the shareholders as dividends will be reduced.”
“Hmm.”
“Assuming that we make 180 billion won, and we distribute the entire profit of 9 billion won to our shareholders, Minister Lee’s father—Mr. Beom-Sik Lee—would receive 1.35 billion won as his dividend. Of course, the amount is the one before tax.”
“Hmm.”
Gun-Ho could hear a deep sigh on the other line.
Gun-Ho said, “Once we determine the amount that will be distributed to our shareholders, I will let you know, sir.”
“I believe that Dyeon Korea secured a significant amount of funds as it was successfully registered with KOSDAQ.”
“Yes, a bit. Dyeon Korea intends to reinvest those funds by establishing additional manufacturing facilities overseas.”
“How much ownership interest does GH Mobile have for Dyeon Korea?”
“Dyeon Korea is a joint venture company with Lymondell Dyeon in the U.S., and the two partners used to own the company in equal portion—50:50.”
“Since the company shares have been offered to the public, the ownership interest owned by those two partners must have been shrunk.”
“Right. GH Mobile currently owns 34.6% of the ownership interest after the company shares were offered to the public, and also to its employees per the employee stock ownership program.”
“Hmm.”
“Pursuant to the joint venture contract, I will resign from the president position with Dyeon Korea in December this year. A new president will be appointed by Lymondell Dyeon.”
“What is the… market capitalization of Dyeon Korea right now?”
“Dyeon Korea’s total number of issued shares is 5.2 million. The par value is 5,000 won, so the capital would be 26 billion won. The stock price fluctuates every day, so if we assume the price is the same as the price of our initial public offering of 26,200 won per share… Let me bring my calculator. Give me one second, sir”
“Hmm.”
“Dyeon Korea’s market capitalization would be 136.24 billion won.”
“That means that if someone wants to buy Dyeon Korea, it would cost him 136.24 billion won.”
“If that person buys it at this very moment, yes it would cost him that much. However, who would sell a company at this moment. I would grow the company further, and sell it at a much higher price.”
“You are an incredible man, Mr. President Goo. A CEO like me, who is employed to run a business, can’t do what you have been doing.”
“Thank you, but I actually admire you, Mr. CEO Park. You are a highly well-known figure in the industry, who often appears in the media. You are one of the best economic experts and professional executives.”
“It’s much better to have your own business even though it’s not a large company. I envy you, Mr. President Goo.”
“You are embarrassing me today with excessive compliments, Mr. CEO Park.”
“Well, I guess I got the answer that I was wondering about. Thank you for talking with me today.”
“Thank you.”
After getting off the phone with CEO Park, Gun-Ho thought about it.
‘Why did CEO Park ask about Dyeon Korea’s market capitalization all of a sudden? Moreover, he can find it out easily by googling too. And, selling and buying the company is totally up to me as its owner. Even though he helped the company with increasing its sales, he is in no position to talk about selling the company.
By the way, should I let GH Mobile distribute the entire profit to its shareholders without paying for its financial debt? If I assume that the net income is 9 billion won, Minister Jin-Woo Lee’s father will receive his dividend of 1.35 billion won, and since I own 82%, I will receive 7.38 billion won. Should I do that?
President Song will be a part of this distribution as well; he owns 3% of the ownership interest, and he will receive 270 million won as a dividend. I’m sure he is expecting it this time.’
