Doosan Bobcat shares plunge more than 10% after 5% stake block sale

Doosan Bobcat shares plunged more than 10 percent by midday on Wednesday after four major brokerage investors sold their combined holdings of 5 million shares in a block trade before the market opened.

Doosan Bobcat shares plummeted 14.87 percent to 35,200 won ($26.67) in midday trading on Wednesday.

NH Investment & Securities, Korea Investment & Securities, Kiwoom Securities, and Shinyoung Securities sold their combined 5 million shares, or 4.99 percent, in Doosan Bobcat before the stock market opened today.

According to the investment banking industry, they sold their holdings at 37,000 won at a discount rate of 10.5 percent from Tuesday’s closing prices of 41,350 won. Based on it, the securities firms raised 185 billion won. A settlement deadline is Friday.

The four securities firms purchased Doosan Bobcat’s 9,866,525 shares in total from Doosan Enerbility in a price return swap (PRS) deal in 2018. In a price return swap, the company takes the difference when the underlying equity’s price is higher than the initial price when the deal is signed. On the other hand, the company is entitled to compensate investors for the loss in the case of price depreciation.

Doosan Bobcat shares were bought by the securities firms at 34,800 won apiece on August 29, 2018. But as the equipment manufacturer’s share prices rallied 23.4 percent this month alone, the brokerage firms are said to put their shares up for a block trade to reduce loss. The remaining shares must be held for three months.