Meritz Financial stock soars over decision to incorporate affiliates
Meritz Financial Group recorded another winning streak in its stock price on Wednesday, attributed to its decision to incorporate its key brokerage and non-life insurance affiliates by early next year.
The stock price ended at 36,400 won ($26.88) at Wednesday’s closing, a 4.75 percent jump from the previous trading session. The stock price jumped by 29.91 percent during Tuesday’s trading session, which is the highest daily surge possible under the KOSPI’s upper-limit rule that stipulates a ceiling of 30 percent on daily increases for listed stocks.
Upon the start of Wednesday’s trading, the stock price reached 45,150 won, another maximum daily increase of 29.93 percent. Yet the price fell quickly back to 36,700 won within half an hour of trading. The price continued to fluctuate throughout the day’s trading hours, finishing at 36,400 won.
The financial group’s stock price surge began with its announcement earlier this week that it plans to completely incorporate two of its subsidiaries — Meritz Fire & Marine Insurance and Meritz Securities — by early next year. The stocks of the two subsidiaries, both listed on the main benchmark KOSPI market, will be delisted by then.
Stock owners of the two affiliates will be given a proportional amount of Meritz Financial Group stocks, according to the number of stocks that they (individually) already have. The granting of the new shares to the holders is slated to be completed by Feb. 21 next year for Meritz Fire stockholders, and by April
25 for Meritz Securities stockholders.
The company explained that the decision was made to reallocate capital for generating stable profits amid increased market volatility and uncertainties.
“The company has decided to incorporate its two affiliates in order to respond proactively to changing external market conditions amid expanded volatility and uncertainties of the global financial markets and to stably generate profits,” Meritz Financial Group Vice Chairman and CEO Kim Yong-beom said during a conference call held earlier this week.
Kim added that the decision will facilitate the company’s process of a
capital increase, when necessary.
“As the three companies have been each listed on the KOSPI market, it usually took at least six months to a year to issue new shares to attract new capital,” he explained, saying that the firm actually missed some investment opportunities due to the long procedures for listed subsidiaries.
Meritz Financial Group also expects the decision will maximize the subsidiaries’ synergy effects, by optimizing their deal sourcing capabilities and long-term investment structures.
“The streamlined decision-making process will contribute to the company’s establishment of a stable and efficient management system,” the vice chairman said.