South Korea’s financial authorities have launched an investigation into possible insider trading by Samsung executives in a controversial mega-merger between its key units, Samsung Group's fashion unit Cheil Industries and its construction and trading affiliate Samsung C&T.
When the Samsung Group was pushing for Cheil's takeover of Samsung C&T, it resorted to “patriotic” marketing tactics on a large scale to win over minority shareholders. As a result, the most outspoken opponent, U.S. hedge fund Elliott, was inevitably depicted as an opportunistic profit-taker biding his time to eat and run. However, as high-ranking officials at Samsung affiliates are suspected of having been busy solely lining their own pockets, there is a high sense of despondency amongst minority share holders and the public.
According to South Korea’s top financial regulator, the Financial Services Commission (FSC), and industry insiders on December 4, the Korea Exchange (KRX), the country's sole securities exchange operator, monitored stock trading looking for patterns and trends and found that nine high-ranking officials from Samsung Group affiliates had bought large amounts of Cheil Industries shares in April and May. KRX’s Market Oversight Commission (MOC) notified the FSC of its findings; the FSC is currently investigating the allegation.
The nine Samsung executives purchased as much as 50 billion won ($43 million) of Cheil Industries stock right before Samsung officially announced the merger of Samsung C&T and Cheil Industries on May 26. Therefore, it is suspected that the Samsung executives had predicted a spike in Cheil Industries shares based on insider trading information and bought Cheil shares in order to pocket huge profits.
As a matter of fact, in the lead-up to Samsung Group’s official announcement of Samsung C&T-Cheil merger, shares of Cheil Industries had risen for six straight days since May 14. Shares of Cheil Industries, which had hovered in the 130,000-170,000 range in April and May, closed at 188,000 won on May 26 when the merger plan was first announced.
Consulting relevant data obtained from the MOC, the FSC’s investigation team is probing into the allegation without giving the nine Samsung executives the benefit of the doubt.
Samsung Group has yet to announce its official position on the ongoing investigation.
