Hyundai share price down, board approves infamous $10bn purchase

Hyundai Motor Co., South Koreas top car manufacturer, said in a statement today that the notorious 10.55tn won ($10bn) real estate purchase was officially approved by the companys board of directors and two of its affiliates – Hyundai Mobis Co. and Kia Motors Corp. The companies stock plunged since the news of the ludicrous purchase last week.

The price Hyundai paid for the property has been estimated at three times over the marketable level. Real Capital Analytics Inc. reported that the transactions scale is large enough to turn it into the biggest single-asset real estate deal in the world ever.

According to a joint statement of Hyundai and its affiliates, Hyundai Motors is to pay 55% of the deals total. Another 25% of the acquisition will be financed by Hyundai Mobis and the remaining 25% will be paid by Kia Motors.

The approval comes after the boards of directors of the three companies have considered the calculation of the price, as well as the funding abilities and the future value-making possibilities of each of the companies.

“This case showed the problems and the vulnerability of Hyundai Motor Group’s corporate-governance structure,” said for Bloomberg Chae Yi Bai, a researcher at the Center for Good Corporate Governance, a shareholder activist group in Seoul. “There was no going back for Hyundai once Chairman Chung said he wanted the property, regardless of the opposition from the general public and Hyundai’s investors.”

The deal sparked investor protests and worker strikes, the damages of which are yet to be calculated, as the labor unions have expressed readiness to extend strike actions.

Hyundai Motor Co. was 1.32% down to close at KRW 187 000 (~$187) per share today, the lowest in 17 months, marking a one-year change of -28.85%. The company is valued at KRW 49.21tn (~$49.21bn), after losing some 15% since the deal was announced last week.

Analysts expect the stock to rebound however. According to the Financial Times, the 33 analysts offering 12-month price targets for Hyundai Motor Co. have a median target of KRW 287 000, a 54% increase from the last close.

Do you think Hyundai will recover the lost trust and damaged reputation?

Share your opinion in the comments below.