Bad news continues for EcoPro after MSCI snub and chief detained

EcoPro companies have taken a blow from the recent incarceration of the group’s chairman and the group’s failure to make the MSCI index.

EcoPro BM's building in Pohang, North Gyeongsang [YONHAP]

EcoPro companies have taken a blow from the recent detention of the group’s chairman and the group’s failure to make the MSCI index.

EcoPro companies — EcoPro, EcoPro BM and EcoPro HN — have plunged double digits this month following a dramatic jump in April.

EcoPro is a holding company that holds 46 percent of EcoPro BM, a cathode producer, and 31 percent of EcoPro HN, an energy company.

Their combined market capitalization exceeded 45.5 trillion won ($34 billion) last month, beating Hyundai Motor, the country’s largest automaker. The market cap had shrunk to around 36.7 trillion won as of Monday.

EcoPro, which peaked at 820,000 won on April 11, has plunged around 36 percent, while EcoPro BM has fallen 29 percent from last month peak and EcoPro HN 32 percent from its peak in March.

The prices fell following Thursday’s detention of Lee Dong-chae, EcoPro Group’s chairman and founder, after an appeals court gave him a two-year sentence for violating the capital market act.

Lee profited around 1.1 billion won by taking advantage of undisclosed information between 2020 January through September 2021, the court said.

He was also charged 2.2 billion won in fines and 1.1 billion won in additional fees.

EcoPro’s failure to make the MSCI Korea index on Friday also disappointed investors.

EcoPro was expected to make the index, designed to measure the performance of large and mid-cap segments of Korea using U.S. index provider Morgan Stanley Capital International’s data.

The sudden spike in its price was probably why it failed to make the index, according to analysts.

Evaluations for the index were carried out on April 18, after the stock reached its peak on April 11.

According to the MSCI, “Securities that exhibit extreme price increases will not be eligible for addition (or migration) into the Standard Indexes.”

MSCI considers stocks that jump 100 percent to 400 percent from between five days and two months prior to the evaluation to be overheated and ineligible for inclusion.

An inclusion onto the index usually raises the stock price and trading volume.

Analysts are continuing to warn that EcoPro stocks are overheated.

Analyst Jeong Chang-hyun from Daishin Securities slashed EcoPro BM’s target price to 250,000 won from 270,000 in a report last week titled, “High Risk, Low Return.”

It rallied in a pattern “not explainable by the underlying fundamental and became less attractive in the near term from a risk-rewarded perspective,” Jeong said.

Han Byung-hwan, an analyst at Eugene Investment & Securities, wrote a sell report on EcoPro BM earlier this month, saying its growth through 2030 has already been reflected in the price.

EcoPro closed down 4.23 percent, EcoPro BM 1.76 percent and EcoPro HN 0.64 percent Monday.

BY JIN MIN-JI [jin. minji@joongang.co.kr]