Ahn Lab`s political stocks

“Themed stocks” refer to shares whose prices soar after being affected by a specific factor. A wide range of variables such as corporate earnings, politics, economy, society, weather and fashion can affect stocks. In certain cases, stock prices soar but plummet soon after the bursting of a bubble. When speculators increase stock prices by using themed stocks and sell them after earning profits, other individual investors often suffer losses.

The stock price of Ahn Lab, whose largest shareholder is company founder Ahn Cheol-soo, now the dean of Seoul National University Graduate School of Convergence Science and Technology, saw its highest closing price of 100,000 won (88.70 U.S. dollars) on Tuesday. Given its par value is 500 won (44 cents), Ahn Lab`s stock price shot up 200-fold. Samsung Electronics whose par value is 5,000 won (4.44 dollars) closed at 941,000 won (834.9 dollars) the same day. The stock price of Ahn Lab was effectively higher than that of Samsung, Korea`s leading company. The next day, however, Ahn Lab’s share price closed at 85,000 won (75.42 dollars) while Samsung`s rose a bit to 945,000 won (838.5 dollars).

Ahn Lab’s share price soared in early September, when Ahn was considering running for Seoul mayor. Given that the price closed at 34,650 won (30.70 dollars) back then, the price has more than doubled in such a short period of time. The valuation of Ahn’s equities increased from 71.8 billion won (63.7 million dollars) earlier this year to 372 billion won (330.8 million dollars) Monday. Though Ahn Lab’s recent earnings were better than expected, experts say the critical reason was Ahn’s political decision, which made the company’s shares “politically themed” stocks. The Korea Exchange designated the company an item for investment caution Friday last week and lifted the level to investment warning Tuesday.

Analysts say there is a bubble if the per equity ratio, or PER, is more than 20-fold. Ahn Lab’s PER is around 60-fold, implying that political reasons rather than corporate performance are behind the company`s surging stock value. Some claim that speculators must have been involved. Individual investors are advised to make a reasonable decision based on objective performance or could regret buying themed stocks at exorbitant prices.

Editorial Writer Kwon Sun-hwal (shkwon@donga.com)