The stock price of PharmaResearch, which had surged due to the 'Rejuran' craze, has undergone a correction. This is influenced by PharmaResearch's announcement of a spin-off to transition into a holding company structure. Securities firms expect the company's value to grow further in the future, considering the business's growth potential. However, some individual investors express concern that only the controlling shareholders may benefit.

PharmaResearch shares traded at 443,500 won on the KOSDAQ market at 10:47 a.m. on the 16th. This is an increase of 2.42% (10,000 won) compared to the 13th, but only a partial recovery of the decline of 17.11% (89,500 won).

Courtesy of PharmaResearch

On the 13th of this month, PharmaResearch announced its spin-off plan. The core idea is to divide the company into 'PharmaResearch Holdings (tentative)' for investment management and a newly established entity 'PharmaResearch (tentative)' to continue its aesthetic business.

The first point of discussion is the partitioning ratio. Based on the value of assets, PharmaResearch Holdings will hold 74.28%, while PharmaResearch will hold 25.72%. Simply put, if a shareholder has 1,000 shares of PharmaResearch, they will end up with 743 shares of PharmaResearch Holdings and 257 shares of PharmaResearch after the spin-off.

The issue is that the shares of PharmaResearch Holdings, which are more widely held, are likely to decrease in value, considering concerns about duplicate listings and the characteristics of holding companies. In contrast, shares of the new PharmaResearch, which are expected to show profitability and growth, are relatively less.

The expectation of a paid capital increase through tangible contribution is also a burden for the shareholders. According to fair trade laws, a holding company must own more than 30% of the shares of its listed subsidiaries. Since this is a spin-off, PharmaResearch Holdings will have no shares in the newly established PharmaResearch. There is a high possibility that the largest shareholder, Chairman Jung Sang-soo, and others will transfer their shares in the new PharmaResearch to PharmaResearch Holdings, in exchange for shares in PharmaResearch Holdings.

Chairman Jung noted that his stake in PharmaResearch has decreased from 34.51% at the end of March last year to 30.48% at the end of March this year, but that the transition to a holding company structure could increase corporate governance. In this process, if PharmaResearch Holdings is relatively undervalued and the new PharmaResearch is overvalued, it will be advantageous for Chairman Jung. For minority shareholders, this means that their shares, which are widely held until the completion of the restructuring into a holding company, may have limited value, while only those with fewer shares may see an increase in value.

Global investment bank Macquarie said, 'Many investors perceive that this spin-off structure has been designed as a means for Chairman Jung to inherit managerial rights, and it is likely to act as a factor for stock price decline in the short term.'

There have also been murmurs regarding the timing. Some suspect that PharmaResearch initiated the restructuring before the amendment of the commercial law was processed by the new government. Some minority shareholders are advocating to inform President Lee Jae-myung of the unfairness of PharmaResearch's spin-off.

Must Asset Management, which holds 1% of PharmaResearch's equity, stated, 'If a holding company is necessary, it could have simply spun off as a 100% owned subsidiary and promised not to relist that subsidiary with related regulations.' They expressed doubts, asking whether the recent spin-off decision was for all shareholders or just for the major shareholder, and expressed willingness to question whether this company's decision-making would remain faithful to shareholders when the commercial law is amended.

PharmaResearch has stated that it is pursuing a spin-off and restructuring into a holding company out of a risk management perspective. PharmaResearch explained, 'From 2023 to 2025, there have been some disturbances during the process of acquiring management rights over CTCBIO, leading to concerns that investment activities could impact the overall company,' adding that 'there is a need to separate risks as we plan to engage in mergers and acquisitions (M&A) and investment activities to advance into the top global healthcare group.'

PharmaResearch has decided to buy back and retire its shares worth 62.7 billion won to soothe its shareholders. They also announced that the payout ratio for both PharmaResearch Holdings and the new PharmaResearch will be raised to 30%, more than double compared to last year's 14.6%.

Courtesy of PharmaResearch

The key issue is whether the combined market capitalization of PharmaResearch Holdings and the new PharmaResearch after the spin-off can exceed the existing market capitalization of PharmaResearch. If this happens, investors could benefit from this governance restructuring.

There are many forecasts that the stock price of the new PharmaResearch may increase, which could raise the combined value of equity above the current stock price. Kang Si-on, a researcher at Korea Investment & Securities, stated, 'While a decline in value for PharmaResearch Holdings post-relisting is inevitable, the valuation logic for the new PharmaResearch based on the growth potential of Rejuran remains unchanged.'

Jo Tae-na, a researcher at Eugene Securities, commented, 'If you look at the price objectively, the value of the new PharmaResearch will find an appropriate corporate value post-relisting, and the combined equity value will necessarily be higher than the current PharmaResearch stock price.'

However, some opinions suggest that the stock price increase for the new PharmaResearch may be limited due to the splitting of the company for investment and business. Shin Min-soo, a researcher at Kiwoom Securities, explained, 'Considering that the momentum of M&A will be reflected in PharmaResearch Holdings after the partitioning, it will be difficult for the product diversification strategy of current PharmaResearch to be reflected in the new PharmaResearch,' and adjusted the price-earnings ratio (PER; market capitalization ÷ net profit) used to set the target stock price from 33 times to 30 times.