Gu Bon-jun, chairman of LX Group (LX Holdings), canceled the donation of LG shares to his son Gu Hyung-mo, president of LX MDI, and then donated it again. This is the second time. It seems to be aimed at saving on gift tax as LG's stock price continues to decline.
According to the Financial Supervisory Service's information disclosure system (DART) on the 28th, Chairman Gu decided to donate 1,573,000 LG shares to President Gu but canceled it on the 25th. He then donated it again the next day.
Chairman Gu first disclosed the donation of the same amount of LG shares in September last year, but canceled the donation in December of the same year and donated it again. The market sees this as a tax-saving strategy.
The gift tax on listed shares is based on the average closing price two months before and after the donation date. The lower the stock price, the lower the gift tax. LG's stock price peaked at 103,600 won in March last year and has since followed a downward trend to the 60,000 won range.
The average closing price of LG over the two months before September 23, the date when Chairman Gu first decided to make the donation, is 79,490 won. Based on December 18, when the first donation was canceled and re-donated, the average closing price of LG had decreased to 74,532 won.
The average closing price of LG over the two months before this second donation and subsequent donation is 69,484 won. The closing price on that day fell further to 65,700 won. If LG's stock price continues at this level until May, the average closing price will remain at around 67,600 won.
Based on this, the value of the LG shares that were initially intended to be donated decreases from about 125 billion won to about 106 billion won. Simply calculating at the highest gift tax rate (50%), the burden of gift tax decreases by about 9.5 billion won.
However, the actual size of the gift tax may vary depending on the future trend of LG's stock price. Securities firms see LG as undervalued. The average target price suggested by six securities firms that have expressed investment opinions on LG since February is 89,700 won.