Lotte shares continue slide on family feud

The share values of Lotte Group affiliates continued to slide last week as the founding family’s feud over the succession process within the retail giant has tarnished their image. 

The slide began on July 28, when the power game between Shin Dong-joo and Shin Dong-bin, the elder and younger sons of Lotte Group founder Shin Kyuk-ho, became public.

The shares of seven listed Lotte affiliates have fallen an average 2.81 percent in the nine trading days from July 28 through Aug. 7. The fall was twice as sharp as the 1.42 percent fall of the benchmark KOSPI average during the same period. 

Among the seven major Lotte affiliates, Lotte Insurance saw the largest dip in share price. The insurer closed at 2,985 won per share, down 8.58 percent over the past nine trading days.

Shares of Lotte Chemical, Lotte’s No. 1 affiliate in market capitalization, dipped to 240,500 won, down 4.65 percent from 252,000 won.

Lotte Confectionery and Lotte Chilsung Beverage also saw shares slide 4.12 percent and 2.65 percent, respectively. Lotte Shopping, the operator of Lotte Department Stores, joined the downslide along with Lotte Mart, Lotte Super and Lotte Cinema.

Meanwhile, the other two listed Lotte Group affiliates, Lotte Himart and Lotte Foods, saw slight gains of 1.75 percent and 0.88 percent, respectively.

Lotte affiliates’ share prices continued to fall despite the younger Shin’s public apology over the family feud on Aug. 3.

Returning from Lotte Holdings Japan, Lotte Group chairman and heir apparent Shin Dong-bin said he would “resolve the crisis and swiftly normalize the companies.”

Yet experts estimated that Lotte shares may slide further, as government regulators have launched an investigation into Lotte’s ownership structure, money transfers and overseas operations.

On Aug. 6, the Fair Trade Commission and the ruling Saenuri Party agreed to order family-run conglomerates to report their stakes in overseas operations. The move aims to increase transparency of chaebol governance, on the premise that cross-shareholding can cause serious market confusion. 

On the same day, Finance Minister Choi Kyung-hwan said in a tax policy review meeting that Lotte Group’s ownership structure and money flows would be thoroughly reviewed.

“It is really disappointing for the (country’s) fifth-largest conglomerate to be hit by a succession war,” the minister added.

By Chung Joo-won (joowonc@heraldcorp.com)