SecondPro headquarters, located in Cheongju, Chungcheongbuk-do.
The leading players of the secondary battery sector, who had recently been driving the KOSDAQ frenzy, had gathered in one place.
“...”
“...”
And yet none of their faces were bright.
Because it was a scene they had all seen before.
Roughly four years ago, with the secondary battery craze that swept through Korea, SecondPro had seemed poised to become a company with a market capitalization of 100 trillion won in no time. But the moment it hit its peak, it suddenly plunged, returning to where it had started as if nothing had ever happened.
This time was no different.
SecondPro had soared terrifyingly without any particular good news, and everyone was already worried that the past might somehow repeat itself.
“If everyone’s here, let’s begin the meeting.”
As if conscious of the atmosphere, Ha Minsu, CEO of SecondPro, spoke in a heavy voice.
“Start with the quarterly report. Director Kim, how did it turn out?”
-Yes, we had strong results. The first-phase investment in Indonesia recorded 150 billion won in operating profit in the third quarter.
“150 billion won means eight times higher than last year?”
-That’s correct. Sales rose 60%, and for the first time in our history, we’ve posted profits for four consecutive quarters. The outlook going forward is also bright. According to data announced at the Davos Forum, every country in the world has a firm commitment to eco-friendly industries. Demand for electric vehicles is expected to rise even further.
CEO Ha nodded with an impassive expression.
In truth, there were few people who denied the era of secondary batteries. Secondary batteries, which could be used semi-permanently, were essential not only for eco-friendliness but also for the age of electric vehicles.
SecondPro was a small but strong company rarely seen in Korea, boasting top-tier technology in cathode materials and batteries. Thanks to that, it was one of the few companies that could stand shoulder to shoulder with Korea’s major conglomerates.
“Good. Very good. We succeeded in producing high-nickel cathode materials, and demand for precursors will only rise from here, so our subsidiaries’ operating profits should increase as well.”
-I was just about to tell you. Our subsidiaries’ sales and operating profits are also at all-time highs. Their outlook is significant too. If you announce that shareholder return policy during this conference call, our current market cap of 20 trillion won could break through to 100 trillion!
“No. You’re wrong.”
-...Pardon?
“It’s 20 trillion now, but by the time the conference call comes around, it’ll probably be back down to 5 trillion. Isn’t that right, President Choi?”
As the CEO’s cold assessment continued, the brief excitement in the conference room sank once more.
SecondPro’s conference call—its earnings announcement—was about a month away, but based on experience, this atmosphere would never last longer than a month. In fact, the Financial Supervisory Service had already designated all SecondPro shares as issues for administration.
It was as if the government had certified it as a roller-coaster stock.
In the heavy atmosphere, President Choi, CEO Ha’s closest aide, answered.
“Yes. We expect volatility to be considerable for some time. Yesterday, too, it shot up as much as 20% during intraday trading, then fell back down to 5%.”
“That’s exactly what I’m most curious about. In a situation already this unstable, why on earth did the pension fund sell?”
“I believe there are two reasons.”
“Two?”
“One seems to be to offset the steep rise so that our stock price doesn’t become a gambling den like before. The other is...”
“The other?”
“It seems they see the outlook for our SecondPro as being exactly that much.”
The conference room froze even further.
The fact that the leader among institutional investors had sold its shares was not a good sign in many ways. Even so, if its purpose had been to curb the overheated frenzy, that would at least be fortunate. But if the pension fund had sold because of the company’s outlook, no one even wanted to imagine what would come next.
That was practically a government agency calling the top right here.
“So in the end, it’s vision? In the end, it’s all about vision...”
CEO Ha folded his arms, looking uncomfortable.
In truth, in this day and age, corporate sales might be an almost meaningless indicator. Seeing how Intel, which had dominated the 1990s, saw its stock price collapse the moment it announced record-high sales and had now fallen into the ranks of second-tier semiconductor companies, the numbers right in front of you were not what mattered in stocks.
Conversely, didn’t Teslan have less than half of Asan Motors’ operating profit, while its market cap was several times larger?
If shareholders thought there was a future, they would gladly endure the present, but if there was no future, they would run away even from record results.
“...”
But if asked whether SecondPro’s future was truly bright, no one could confidently say yes.
“Executive Director Kim, what is the secondary battery market like right now?”
-Ah, that content is all in the conference call script...
“Not the snake-oil salesman report dressed up with every rosy projection imaginable. The real reality. I’m telling you to speak about our company’s outlook.”
As CEO Ha spoke emphatically, Executive Director Kim hesitated.
Seeing the CEO’s resolute face, it was the expression of a man who wanted to hear the truth even if it hurt.
-There are many competitors...
Executive Director Kim spoke in a cool tone.
-Looking at current global market share, Ningde Shidai and Biyadi are overwhelmingly dominant, holding around 70%. Ningde Shidai possesses unrivaled technology in lithium and ESS, and Biyadi is expected to expand even further by effectively supplying its own finished vehicles exclusively with batteries it produces in-house.
“But we’re in cathode materials. Isn’t that a different field?”
-The problem is that they’re aiming for the cathode materials market as well. In fact, within the cathode materials market itself, Chinese companies Ronbei and Lishain have surged to second and third place. Meanwhile, our SecondPro’s market share has fallen to sixth.
The executives let out brief sighs.
In truth, for a Korean mid-sized company to rank sixth in global market share was an astonishing achievement. If it could consistently maintain even that ranking, SecondPro’s current stock price was by no means exaggerated.
The problem was that it had originally been first...
As competition intensified, the number one spot had been taken by Geumseong Energy, and Chinese companies had forced their way into the middle as well, causing SecondPro to fall to sixth place. The reason SecondPro’s stock price, which had once sparked a KOSDAQ frenzy, had vanished in an instant was because investors believed that this ranking would continue to fall in the future.
“Damn it... Then this question will come up again from reporters at the conference call. What am I supposed to answer?”
As CEO Ha asked in a voice tinged with anger, President Choi opened his mouth.
“I think it might be better to go on the offensive instead.”
“Offensive?”
“The things we’ve always discussed in this conference room. Chinese companies are constantly eyeing our rice bowl, so why are we always busy defending? This time, we shouldn’t obsess only over cathode materials. We need to diversify into profitable industries such as lithium processing and precursors.”
“But isn’t that a discussion we’ve already concluded was a no several times over...? Even the mighty Hoam Electronics challenged non-memory semiconductors and had its market share stripped bare. In the meantime, its memory market share was caught up to by Hynix too.”
“If you only stare at the shadow, you won’t see the sun.”
“What?”
“If you put it that way, Hoam Electronics should have remained a company that only sold cell phones. From the perspective of the 1990s, Hoam’s investment in semiconductors was clearly reckless.”
“President Choi, do you really want to make the board even bigger?”
“I saw hope. The biggest strength of Chinese batteries right now is their low-price offensive, but with the establishment of our Indonesian plant, we’ve reduced our unit costs as well. Technology? Thankfully, they haven’t reached a super-gap level yet. Ningde Shidai may have unrivaled technology in ESS, but if we chase closely, we can catch up within two or three years.”
CEO Ha sighed.
“That two or three years is exactly the problem. Who is going to endure that, and how?”
“Sir, we can no longer put off that discussion.”
“That again?”
“Yes. We need to carry out a paid-in capital increase. With that money, we invest in R&D to raise our technological capabilities, and establish overseas plants to cut unit costs. Now, when the stock price has risen sharply, is our opportunity.”
The moment the subject of a capital increase came up, all the executives rose up like a swarm of bees.
-Sir, anything but a capital increase!
-The Financial Supervisory Service has already designated our stock as an issue for administration. It’s a stock price that could fall at any moment. In that situation, if we push through a capital increase, who is going to bear the resentment?
-To put it coldly, SecondPro’s market cap is not even half of what it is right now. We absolutely must not get carried away by the current KOSDAQ fever!
The opposing faction rose up as well.
-Then when are we supposed to carry out a capital increase? We have to do it when the stock price is at its peak to secure the most funds!
-That’s right. And it’s not as though we’re doing a capital increase because the company’s finances are in trouble, is it?
-If we’re going to invest in R&D and build more overseas plants, we need enormous funds. If the purpose is clear, the shock to the stock market won’t be as big as expected.
While CEO Ha and President Choi remained silent, both sides rose to their feet.
-You think there won’t be any shock from a capital increase if the purpose is clear? That’s naïve nonsense! Even when big tech companies carry out capital increases, their stock prices plunge. But you think there won’t be any shock when we do it?
-That’s why we proved it, didn’t we? The Indonesian investment in the third quarter recorded 150 billion won in operating profit. That’s eight times growth compared to last year. I’m telling you, if we establish overseas plants, we can sufficiently prepare for the Chinese low-price offensive.
-Even so, we still haven’t recovered even half the plant construction costs! If the industry gets worse, the loss will fall entirely on us.
-That is needless worry. Every country in the world is rushing toward an eco-friendly era. How could the battery industry suddenly become difficult?
-Europe withdrew its ban on internal combustion vehicle production by 2035. Our entire industry is full of variables right now!
-We still have to invest!
-We have to be cautious! The National Pension Service is selling its stake too!
As the executives argued to the point of pointing fingers at one another, CEO Ha slowly closed his eyes.
It was a difficult problem. When should a small or mid-sized company carry out a paid-in capital increase?
In truth, the higher the stock price, the more right it was to carry out a capital increase.
The battery industry was still only in the preliminary stage before the chicken game had even begun. To overcome the triple burden of technological innovation, unit-cost innovation, and profit diversification, a commensurate amount of bleeding and investment was essential.
The more war funds, the better.
-Does that make any sense? Chinese battery companies have reliable prime customers behind them!
But considering the unique characteristics of the battery industry, that too was not an easy matter.
By nature, the fate of the parts industry was decided by its prime customers. Just as Korean semiconductors could grow only when American AI grew.
For Chinese battery companies, the Chinese authorities, who were staking everything on energy hegemony, were their biggest sponsors. The secondary batteries Biyadi produced in-house even had the secure sales channel of exclusive supply to its own company.
By contrast, SecondPro’s main customers were big tech companies in the United States, and not only did that bring political variables, there was also no guarantee that a customer would remain a customer forever.
Asan Motors, which had recently shown innovative technology in robotics but was still struggling in the electric vehicle market, was another source of anxiety. Even if, by making every possible concession, SecondPro won an exclusive supply contract with Asan Motors, what meaning would the contract have if the prime customer’s own sales were sluggish?
“Enough. I think we’ve discussed this sufficiently, so let’s stop here.”
Having made up his mind, CEO Ha opened his mouth.
“They’re good opinions. When I listen, they all make sense... But I think we should be a bit cautious at this conference call. There’s no need to turn record sales into a funeral parlor, is there? As for the capital increase, for now...”
Just then, the door burst open and his chief secretary rushed in, flustered.
-S-Sir, we have a serious problem.
“Damn it! We have to hold out until the conference call! Did the stock price crash again?”
-That’s not it. Someone from the pension fund is here.
“What?!”