The biggest loser due to the surge in Eunsung Motors’ stock price was Albert Management.
Carl Singer was in shock.
“Why on earth would Kang Jin-hoo…?”
Kang Jin-hoo was the very person who started this whole mess in the first place.
On the contrary, he had only applied more pressure; no one had imagined he would offer help.
The short selling that had been pouring in had been absorbed by unidentified foreign capital, including Golden Gate. They would have naturally known about this announcement in advance.
‘Could there have been some sort of deal?’
His hunch was right.
Eunsung Motors announced a stock split, the sale of its large truck division to CarOS, a change in its governance structure, and a share buyback.
This was another piece of good news.
The stock price soared again, not only recovering all the previous gains but now even facing the risk of losses.
There was a way to completely suppress the buying momentum by dumping a large amount of short positions at once, but with Kang Jin-hoo taking action, the market trend had completely reversed.
Reversing that trend again was not going to be easy.
Some experts predicted a bright future, expecting cooperation between CarOS and Eunsung Motors.
Everything had gone wrong because of Kang Jin-hoo.
Now, the only way out was to liquidate the short positions as quickly as possible. But the more they bought, the higher the stock price went, and the higher the stock price went, the more buying followed, increasing their losses.
Carl Singer gritted his teeth and shouted.
“Kang Jin-hoo, you son of a bitch!”
***
Unlike Eunsung Motors, where short covering was happening relatively quickly, bio stocks showed a balanced equilibrium between buying and selling pressure.
Eunsung Motors’ stock price rebounded as soon as the immediate problem was resolved, thanks to its stable sales and profits. On the other hand, the overvaluation issue for bio stocks had not yet been resolved.
How can the value of a company be assessed?
There are various indicators for valuation: PBR, PER, ROE, and so on.
However, these are just indicators and not absolute standards. It’s inherently impossible to compare fundamentally different businesses like manufacturing, distribution, service, IT, and gaming using the same criteria.
Especially for bio stocks, future growth expectations are more important than current sales and profits. Even if a company is continuously making losses, once a drug gets sales approval, sales and profits skyrocket from that point onward.
However, the outlook for bio stocks was generally negative.
Deep distrust in the Korean pharmaceutical industry underpinned this sentiment.
A biosimilar is a drug that is a near copy of an original biological medicine whose patent has expired. It is produced using molecular biology techniques, utilizing effective substances from living cells or tissues.
Unlike synthetic drugs, which can be easily made by knowing their chemical formulas, biological drugs that use living cells as raw materials are difficult to replicate.
Due to differences in various conditions during the production process, it’s impossible to create a perfect copy, strictly speaking, and only similar drugs can be made.
Manufacturing itself requires high-level technology, and after manufacturing, separate clinical trials and approvals from institutions in each country are necessary for sales.
Currently, developed countries like the United States and Europe are leading the biopharmaceutical market. The question is whether Korea truly has the capability to produce biosimilars.
The forces driving the short selling had been spreading all sorts of rumors.
The most prominent rumor was about accounting fraud. They claimed the books had been intentionally manipulated, and considering that, the stock price should fall further.
Depending on where accounting standards are applied, it could be accounting fraud or not.
When bio stocks surged due to OTK Company’s investment, hedge funds once again spread accounting fraud rumors to induce a stock price decline.
Bio companies had been fighting short-selling forces for a long time, even pleading with the government about how short selling was hindering their businesses. They had used almost all available measures like stock splits and share buybacks, but they couldn’t stop the short selling.
Hedge funds, well aware of this fact, continued their short selling instead of immediately engaging in short covering. Ironically, domestic securities firms joined in.
Besides short selling, bio stocks also had a high volume of margin loans taken out by individual investors to buy shares. With the stock price plunging by more than 40 percent in a short period, there were concerns about massive forced selling (margin calls).
In fact, for securities firms, it was a no-brainer, a sure-win situation.
They made money by lending customers’ shares to hedge funds for fees and by providing margin loans to individuals.
Since they held the shares as collateral anyway, if the stock price fell and there were concerns about principal loss, they could simply execute forced selling and recover the funds. Despite being essentially a loan with no risk of principal loss, the interest rates were over 10 percent.
The nature of institutions is to make money whether the stock price falls or rises.
That is, unless they directly engage in short selling themselves.
However, securities firms not only lent out shares for short selling but also joined in the short selling spree in line with the attacks from speculative capital.
They didn’t care about the potential harm to their clients. All that mattered was making a profit.
Amidst all this, when OTK Company announced its acquisition of bio stock shares, the falling stock price suddenly soared.
Unlike the hedge funds that had been shorting for a long time, securities firms had only recently started short selling.
While the absolute amount of losses couldn’t compare to the hedge funds, the loss rate was much higher for the securities firms that jumped in late.
Securities firms collectively released negative reports, trying to induce individual investors to sell.
[Bio Stock Overvaluation Controversy: How Long Will It Last?]
[Biosimilar Market: Competition Getting Fiercer]
[Survey Results: Consumers Still Prefer Original Drugs]
[Very Low Probability of Biosimilar Approval]
[Many Hurdles Expected Before Commercialization…]
Normally, this would have been enough to shake the market.
But this time, they were up against a formidable opponent.
-What the hell is this nonsense?
-They’re practically holding a shamanistic ritual to make the stock price fall.
-There’s no need to listen to those guys. Just remember that Kang Jin-hoo is buying.
-I hate Kang Jin-hoo, but I’ll trust him this time!
-Trust in Kang Jin-hoo and let’s go!
-They’re doing all this crap to cover their short positions. Never sell your shares.
-If we hold on a little longer, we’ll win!
-The only thing to keep in mind right now is to just hold on!
***
Since Eunsung Motors involved my own interests, I avoided buying shares directly. Instead, Golden Gate and Chairman Im Jin-yong were actively buying, and they had already made over 30 percent in profits.
Instead, we focused on buying bio stocks.
Compared to value stocks, growth stocks offer higher returns but also come with higher risks.
The most challenging aspect is picking the right companies. If you had invested in Seosung Electronics during the IT bubble, you would have made tens of times your investment, but if you had invested in Saerom Technology, you would have only been left with a few thousand won.
The same applies to bio stocks; some companies will experience significant growth, while others will collapse.
Senior Sang-yeop was the one who picked the stocks.
Even without special abilities like mine, he has a basic instinct for investment.
Back in our club days, we would only pore over financial statements and disclosures, but now the situation was different. Just expressing an intention to invest was enough for them to reach out to us first.
Senior Sang-yeop toured headquarters and factories, and held meetings with management to analyze each company.
“In terms of technology, CellTwins is the best. Its growth potential is also significant.”
“It’s already up 20 percent from the low point.”
“Doesn’t matter, we need to buy more. I think it will break through its previous high and keep going up.”
“What’s your basis for that?”
Developing new drugs requires enormous costs and time. To compensate for that, they are granted exclusive rights to sell for a certain period.
“Why do you think they make generic drugs even when there are original drugs?”
“Because they’re cheaper.”
Senior Sang-yeop nodded and said, “That’s right. The patents for biopharmaceuticals have been gradually expiring for the past few years. If you have the technology to make generic drugs, you can strike gold. Right now, CellTwins is awaiting approval for Plectra in the European Union. Once that’s approved and European sales begin, the atmosphere will change drastically.”
Plectra, a generic drug made by CellTwins, has been approved by the Ministry of Food and Drug Safety and is being sold in Korea, but it has not yet been approved in Europe and the United States.
Currently, they have completed global clinical trials and are awaiting approval from the European Medicines Agency. If approved in the European Union, the possibility of approval in the United States will also greatly increase.
The doors to a massive market would open.
Since Plectra is not the only generic drug awaiting approval, its approval is good news for the entire bio stock sector.
I nodded. “Buy as much as you want.”
“Got it.”
Senior Sang-yeop started buying aggressively.
If the future outlook is good, a temporary drop in the stock price is not a problem. With the capital we have, it’s enough to absorb all the short selling pouring in.
But a few days later, an announcement was made.
[Plectra Unanimously Approved by European Medicines Agency (EMA)!]
[100 Percent Identical Effect to Procade!]
[Path to European Union Exports Opens Up?]
The annual sales of the original drug, Procade, are about $10 billion.
Even if they take just 30 percent of that market share, it’s $3 billion. Once exports to the European Union begin, sales and operating profit will more than double.
As news of the approval spread, CellTwins quickly hit the daily upper limit. Other bio stocks also surged in anticipation.
I clicked my tongue in amazement. “Your skills are still sharp.”
Senior Sang-yeop grinned. “Still useful, right?”
Individual investors who had been holding out while enduring hedge fund attacks and short selling cheered.
Another piece of bad news for the short-selling forces was the exchange rate.
There are two main ways to counter speculative capital’s short selling: one is to raise the stock price, and the other is to lower the exchange rate.
As the stock market turned bullish and capital flowed in, the exchange rate began to decline.
At this point, Berkshire Cashier also announced the acquisition of shares in several companies. Warren Buffett stated that the Korean stock market was significantly undervalued and that they would continue to increase their investment in Korea.
The exchange rate fell even faster.
While domestic capital is not significantly affected by the exchange rate, foreign capital is highly sensitive. Even if they make a profit from their investments, they will ultimately suffer losses if the exchange rate depreciation exceeds those profits.
To cover their short positions, they had to buy back the shares they had shorted, but the falling exchange rate made the actual stock price even more expensive.
As the stock price and exchange rate moved in unexpected directions, causing their losses to snowball, hedge funds that could no longer hold out began to pull out.
With various positive developments and short covering orders pouring in at once, the stock price continued to rise. Securities firms also reluctantly started short covering.
A stock price that is too low is a problem, but a stock price that is too high is also a problem. We diligently sold off the shares we had bought, securing our profits.
-lol, those short-selling bastards are completely screwed.
-Everyone, you’ve worked hard holding on without selling.
-There’s finally light at the end of the tunnel after all that holding ㅜㅜ
-The Korean stock market may be smaller than your country’s stock market, but our market is also great.
-We have globally renowned Seosung and Eunsung, and global speculator Kang Jin-hoo.
-Never disregard the Korean stock market again!
***
With the short-selling forces retreating, the Korean stock market regained some semblance of peace.
The problem is that a similar situation could reoccur at any time. Whether it’s restricting short selling or revising the system to allow individual investors to short sell, the financial authorities remain unmoved despite the barrage of criticism.
Securities firms that should be protecting their customers are making a living off short selling. No wonder the Korean stock market is called the graveyard for retail investors.
Although the stock market had turned bullish for the first time in a while, the hottest market was elsewhere.
It was the cryptocurrency market.
Bantcoin, which had started to rise at the end of the year, had finally surpassed $10,000.
A few years ago, when Bantcoin reached $100, the reaction was one of disbelief. When it hit $1,000, people thought it was crazy.
But when it reached $10,000, everyone was speechless.
Moreover, instead of showing signs of decline, it continued its upward trajectory. No one could even guess how high it would go.
The creators of new coins and early investors had made billions or tens of billions of dollars in just a few years, even changing the world’s rich list.
I was astonished when I received the report on K Company’s performance for last year on VanSum.
The fact that it had increased hundreds of times compared to the previous year was secondary…
“The profit is greater than the revenue.”
The revenue was 533.4 billion, but the profit was 735 billion. In other words, they were making 150 won in profit for selling a 100-won pen.
How is that even possible?
