Bubang Group chairman moves to buy W800m in shares to avert penny-stock delisting

Bubang Group Chairman Lee Dong-geon has decided to purchase approximately 800 million won ($590,000) worth of Bubang shares, as the company's stock price has closed below 1,000 won for 12 consecutive trading days — raising the prospect of a "penny stock" delisting under financial regulators' rules.

According to Bubang Group, Lee plans to buy 805,000 common shares of Bubang on the open market from Dec. 10 to Dec. 21. The planned purchase, valued at approximately 779.24 million won, represents about 1.50 percent of total shares outstanding. Once completed, Lee's stake will rise from 1.93 percent to 3.43 percent.

Bubang's share price closed below 1,000 won for 12 consecutive trading days from Oct. 23 through Monday. Monday's closing price was 968 won. As of 11:35 a.m. Tuesday, the stock was trading at 990 won, up 2.27 percent from the previous session, having briefly touched 1,000 won during intraday trading.

Financial regulators began enforcing a rule in July requiring that any Kosdaq-listed company whose share price stays below 1,000 won for 30 consecutive trading days be designated a watch-list stock. If the price then fails to recover to 1,000 won or above for 45 consecutive trading days within the following 90 trading days, the company becomes subject to delisting.

If Bubang's share price continues to stay below 1,000 won, the company will hit the 30-trading-day threshold on Dec. 3 — a week before Lee is set to begin purchases on Dec. 10. However, if the closing price recovers to 1,000 won or above before that point, the consecutive-day count will reset.

Bubang has rolled out a series of measures this year to support its share price. The company canceled a total of 6,385,779 treasury shares — 3,002,620 in August and 3,383,159 in September — equivalent to about 10.6 percent of shares outstanding before the cancellations.

Management has also been adding to its holdings. Vice Chairman Park Jae-soon, Bubang's chief executive, acquired an additional 20,000 shares in July and then bought 7,500 more between Oct. 30 and Wednesday. Park's total holdings now stand at 134,927 shares.

A share price recovery will also require an improvement in earnings. Bubang's consolidated revenue last year fell to 319.5 billion won from 336.5 billion won the year before, while operating profit shrank to 1.8 billion won from 4.9 billion won. In the second quarter of this year, the company posted an operating loss of approximately 600 million won.

"We will continue our efforts to enhance long-term corporate value and shareholder value based on responsible management," a Bubang official said. The company declined to say whether the share purchase was intended as a direct response to the penny-stock delisting rules.

Analysts say Lee's planned open-market purchase of 800,000 Bubang common shares in December could provide some support for the stock price. Bubang's average daily trading volume over the past 10 trading days has been roughly 60,000 shares.