Amid the wave of foreign exit from the Korean equity market, whether U.S. activist hedge fund Elliott Management will stay and act as a vocal shareholder in Hyundai Motor Group remains questionable as the profit-chasing fund would have to reassess its portfolio against yawning losses in the flagship Hyundai Motor units.
In making management demands in August, the company claimed it held a 3.0 percent stake, or 6.4 million shares in Hyundai Motor, 2.1 percent or 8.6 million shares in Kia Motors, and 2.6 percent or 2.5 million shares in Hyundai Mobis.
Stocks of the trio have skidded since then. Hyundai Motor’s stock price fell by 15.8 percent from the time of its Aug. 13 posting at 123,500 won ($110), Kia 12.4 percent from 32,300 won, and Hyundai Mobis 18.5 percent from 231,000 won.
Given their respective finishes on Monday at 104,000 won, 28,300 won, and 188,300 won, the value of Elliott’s holdings would have dwindled by 266 billion won - 124.8 billion won in Hyundai Motor, 34.4 billion won in Kia Motors and 106.8 billion won in Hyundai Mobis - from the 1.65 trillion won two months ago.
When compared to the fourth quarter when the fund began to build up shares in the three stocks, its losses could have exceeded 500 billion won.
In May, Elliott struck down a major overhaul plan forwarded by Hyundai Motor Group to spin off Hyundai Mobis’ module and after-sales service business and merge them with Hyundai Glovis.
Elliott was at the forefront of the oppositional rally, claiming the merger ratio between the two firms undervalued Mobis shares and hurt shareholders. The decision posed a major setback for Korea’s second-largest conglomerate in its efforts to ensure a smooth transfer of power from the 80-year-old father to his son, Vice Chairman Chung Eui-sun.
Elliott may not pull out if the conglomerate indulges it with higher dividends. But it may have to unload the shares before losses widen.
On Tuesday, shares of Hyundai Motor finished up 3.37 percent at 107,500 won, Kia Motors up 2.3 percent at 28,950 won, and Hyundai Mobis up 3.71 percent at 195,500 won.
Household Korean car brands have been doing poorly this year with output nearly halved from their peak days. Operating profits of Hyundai Motor and Kia Motors nosedived around 70 percent in the third quarter.
By Han Woo-ram and Kim Hyo-jin
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]