This article was published on Feb. 10, 2025, at 10:29 a.m. on the ChosunBiz MoneyMove site.
Amid the intensifying management rights dispute at T’way Air, the ongoing withdrawal of employee stock ownership plan (ESOP) by current executives is drawing attention. ESOP withdrawal refers to transferring the shares deposited in the ESOP association to the individual securities accounts of employees.
The frequent withdrawals of ESOP by executives can be interpreted to stem from two main reasons. First, as the stock price has surged significantly due to the recent management rights dispute, they may intend to sell shares in the market to realize profits. T’way Air's stock price has increased by 40% just this year.
Alternatively, there is also a possibility that they seek to support the current management team in the upcoming extraordinary shareholders' meeting by holding shares in their names rather than in the ESOP association's name. This is because there is no guarantee that the association will necessarily side with the current management team.
According to investment banking (IB) industry sources on the 10th, T’way Air executives have been withdrawing ESOP since last month. On the 16th of last month, Executive Director Lee withdrew 26,954 shares, and on the 17th, Executive Director Park withdrew 27,754 shares.
Executive Director Yoo was reported to have sold 30,000 shares on the stock market at the end of last month and the beginning of this month after a significant rise in the stock price, and then withdrew 28,302 ESOP shares on the 7th. He has publicly stated that he currently holds 110,704 shares. Executive Director Jung withdrew 116,226 shares on the 31st of last month and keeps them in a personal account.
The recent wave of ESOP withdrawals by T’way Air executives coincides closely with the timing when the management rights dispute began in earnest. On the 20th of last month, Daemyung Sono Group sent a management improvement demand letter to YeaRimDang, the largest shareholder of T’way Air, demanding the resignation of the existing management team, including Vice Chairman Na Seong-hoon. (Related article☞ [Exclusive] T’way Air management rights dispute begins… Daemyung Sono sends management improvement demand letter) Based on the shareholder register closure date of Dec. 31 last year, YeaRimDang and Tway Holdings held a combined equity of 30.05% in T’way Air, while the second-largest shareholder, Sono International and Daemyung SonoSeason, held around 26.77%.
The exact reasons behind the executives transferring ESOP shares to their personal accounts remain unclear. A T’way Air official said, "It's difficult to know because it's a personal matter."
Industry insiders raise the possibility that they withdrew ESOP to realize profits by selling shares. In fact, T’way Air executives previously sold their equity during a significant stock price increase last October. One executive sold a total of 20,000 shares in October and November, cashing in about 70 million won. A source from the financial investment industry noted, "At that time, the executives' selling price was around 3,000 won, but last month it rose to 4,500 won, so it's natural to expect more price appreciation."
There could be another purpose behind the executives' ESOP withdrawals. By holding stock directly rather than leaving it in the ESOP association, they can lend support to the current management team regardless of the voting direction of the association. Executives are generally classified as special relatives of the largest shareholder. In fact, as T’way Air executives have successively withdrawn their ESOP, the equity percentage of the largest shareholder and special relatives has increased to 30.14%. This is a 0.09 percentage point rise compared to the closure of the shareholder register at the end of last year (30.05%).
While the equity held by the ESOP association is generally classified as a friendly equity for the largest shareholder or current management team, there is no guarantee that the association will side with them in the shareholders' meeting. The direction of the ESOP association's voting is typically determined through the resolution of the members' general assembly. If Daemyung Sono Group offers better conditions to the ESOP association, the outcome remains uncertain. A T’way Air official stated, "I have not heard whether the ESOP association will determine the voting direction by majority vote."
However, even if the executives want to exercise the voting rights of the withdrawn ESOP directly, it will not be possible at this ordinary shareholders' meeting. This is because the shares were withdrawn after the shareholder register closure date. If an extraordinary shareholders' meeting is convened after this ordinary shareholders' meeting, the executives will be able to directly exercise the voting rights for the recently withdrawn ESOP.