Owner families buying stock of own companies in down market

Park Sang-su, 18, and Park Sang-min, 22, who are the children of Doosan Engineering & Construction Chairman Park Jung-won, each bought 500 Doosan shares in the wake of the stock market slump.

The purchases increased Park Sang-su’s holdings to 17,231 shares and his sister`s to 14,382. As a result, the stake held by the majority shareholders and their relatives rose from 37.52 percent to 43.91 percent.

Lee Jae-yeong, the second son of Daehan Flour Mills Chairman Lee Jong-gak, bought 2,910 shares on the stock market June 5.

In the securities market, the owners of Daishin Securities, which is run by its owner, have grown aggressive in buying the company’s stock. This year, Daishin Securities Chairman Lee Eo-ryong bought 72,982 shares of Daishin`s common stock and her daughter Yang Jeong-yeon, 34, also purchased 112,410 shares. The mother and daughter aggressively bought shares over the past two months, when share prices plunged due to the spread of the European fiscal crisis. Lee bought 30,000 shares on 15 occasions in April and May, while Yang bought about 80,000 over the same period.

The tendency by the owner family of a company to expand its stakes effectively elevate share prices, because purchase of a company’s own stock is considered a display of confidence in its management. Shares of Daehan rose by 4.39 percent on June 5, when news on the purchase of company shares was first reported, while shares of Doosan gained 1.25 percent the same day, when the purchase of the company’s own stock was informed to the market.

These moves were also made to help stabilize managerial rights and hand over the owners’ stakes to their children at low cost.

A source in the securities industry said, “For company owners who seek to increase their stakes to ensure the stability of their managerial control, or who seek to hand over their stakes to their children, a period of low share prices is the best time to buy stakes.”

yunjung@donga.com