In the past five years, over 300 publicly listed companies have seen their stock prices drop by more than 30% within 20 trading days following announcements of stake sales by major shareholders or executives. This trend has raised concerns about the need to enhance disclosure systems to protect investors.
On September 22, Park Seong-hoon, a member of the National Assembly from the People Power Party, analyzed data submitted by the Korea Exchange. He found that from 2022 to August of this year, 321 companies experienced a decline of over 30% in stock prices after disclosures of reduced stakes by major shareholders or executives.
Including instances where multiple stake sales and stock price drops occurred within the same company, the total number of cases reached 435. The average stock price decline 20 trading days after these disclosures was 40%.
There were also numerous cases where stock prices fell sharply immediately after the announcements. Sixty-six companies saw their stock prices drop by more than 30% within five trading days of the disclosure, totaling 72 instances. The average decline in these cases was 38%, with seven companies experiencing drops of over 30% within just one day.
Some individual stocks faced declines of 70% to 80%. For example, CNH, which was once listed on the KOSDAQ, saw its stock price fall by 83.28% within 20 trading days following a related disclosure on August 1, 2024.
Similarly, Aribio Holdings experienced a 70.08% drop in stock price over 20 trading days after its disclosure on January 3, 2024. EoFlow also saw a decline of 69.96% following its announcement on November 23, 2023.
However, it is difficult to definitively attribute the stock price drops directly to the stake sales by major shareholders or executives, as other factors such as the companies' operational conditions, performance, and market environment may have also influenced stock prices during that period.
Nonetheless, the repeated instances of significant stock price declines following stake sales by major shareholders and executives, who typically have better access to internal information, highlight the need to review the timeliness of insider trading information and investor protection measures.
Park Seong-hoon stated, “If retail investors consistently face sharp declines after stake sales by major shareholders and executives, it cannot be dismissed as mere coincidence. We need to ensure that information about large insider transactions is communicated to investors adequately and promptly, and that the pre-disclosure system functions effectively as a genuine investor protection mechanism.”
* This article has been translated by AI.
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