Choi Hyun-bum, chairman of Hankook & Company, was sentenced to three years in prison by a lower court for embezzlement and breach of trust, prompting a surge in the company's stock price. The influx of buyers is interpreted as attention is focused on the potential for a management dispute.
Hankook & Company saw its stock price approach 20,000 won as it rose significantly just before the market closed on the 29th. The stock initially started at around 17,000 won, but surged during trading hours to exceed 18,000 to 19,000 won. The increase at the end of the session reached about 17%.
The 23rd Criminal Division of the Seoul Central District Court, led by Director General Oh Se-yong, sentenced Chairman Choi to six months in prison for breach of trust, and two years and six months for the other charges related to specific economic crimes on the 29th. With the sentence handed down, the previously granted bail was revoked, and Chairman Choi was taken into custody.
Chairman Choi was indicted in March 2023 on charges of providing unfair support by purchasing tire molds worth approximately 87.5 billion won from the affiliate Hankook Precision Works (MKT) at prices higher than those of other manufacturers between February 2014 and December 2017.
MKT is a company in which Chairman Choi and Hankook Tire hold the majority of equity. The prosecution estimated that Hankook Tire suffered damages amounting to 13.1 billion won due to this unfair support. The profits funneled to MKT were considered to have flowed to Chairman Choi and his family.
Chairman Choi also faces charges of embezzling and breaching trust involving approximately 7.55 billion won in company funds from 2017 to 2022.
With Chairman Choi's imprisonment, attention is drawn to the possibility of a power vacuum in management, leading to a potential resurgence of previously occurring management disputes. Choi Hyun-bum, the younger son of Honorary Chairman Cho Yang-rae of Hankook & Company Group, had engaged in a management dispute with his elder brother, Choi Hyun-sik, who is now an advisor, in 2023. Advisor Choi, in collaboration with the private equity firm MBK Partners, sought to conduct a public purchase of Hankook & Company shares.
However, Honorary Chairman Cho Yang-rae supported Chairman Choi, causing Advisor Choi's attempts to come to naught. The participation rate in the public purchase did not even reach half, and the leadership dispute was resolved for the time being.
The stock price surged amid attention on the possibility of a management dispute, but the impact of this lower court ruling on Hankook & Company’s management is expected to be limited, as Chairman Choi holds a significant amount of equity.
As of the end of March, Chairman Choi holds a 42.03% equity stake in the company. Including related parties such as Chairman Cho Yang-rae, this accounts for 47.24%. Advisor Choi holds an 18.93% stake, while his younger daughter, Choi Hee-won, owns 10.61%. The small shareholders hold 19.08% equity.