STEP 1Who owns the company
Just as an apartment complex has a residents' representative, a company has a shareholder with the most votes. Who that is, and how much they hold, shapes the company's direction.
Largest shareholder and related parties
The is the shareholder who owns the most shares of the company. However, disclosures show not just the largest shareholder alone but the combined stake of related parties close to the largest shareholder, such as family, affiliates, and company executives. This is because control of the company is ultimately protected by this 'single block' of shares.
In the annual report, VII. Shareholders presents, in order, the share ownership of the largest shareholder and related parties, changes in the largest shareholder, holders of 5% or more, and minority shareholders. This is the chapter we called 'short but heavy' in Lesson 5.
Robin Bakery's ownership map
Here is how Robin Bakery's (fictional) 2 million issued shares are divided among owners. Founder and CEO Robin Kim holds 700,000 shares (35%), and related parties such as family and executives hold 200,000 shares (10%), for a total of 45%. Institutional investors hold 12%, foreign investors 8%, and the remaining 35% is split among many minority shareholders.
Ownership structure chart · Robin Bakery (fictional), 2 million issued shares Tap a slice to see the filings related to that shareholder.
All numbers are based on a fictional company for educational purposes. Within the 12% held by institutions is a fictional asset manager, 'Pureun Asset Management' (5.4%), which holds more than 5%.
If the largest shareholder's side holds 45%, it is hard for other shareholders to seize control even if they join forces. Conversely, if the largest shareholder's stake is low, in the 10% range, control can be shaken with relatively little money, so each ownership disclosure has a big impact on the share price. What foreign ownership of Korean stocks means for the overall market continues in .
Quick checkIf Robin Bakery issues 400,000 new shares to a third party (Lesson 31), what percentage would the largest shareholder side's 900,000 shares represent?
37.5%. 900,000 shares ÷ 2.4 million shares = 37.5%. Even if you don't sell a single share, your percentage falls when the number of shares grows. That is why capital-increase filings and ownership filings should be read together.
STEP 2The 5% rule and insider filings
If a large investor quietly accumulates shares, the owner of a company can change without other shareholders knowing. That is why the rules require disclosure once a certain percentage is crossed.
The 5% rule: large shareholding report
Anyone who comes to hold 5% or more of a listed company's shares (including securities that can turn into shares, such as convertible bonds), together with related parties, must file a . After that, they must report again if the holding ratio changes by 1% or more, or if the holding purpose or an important contract such as a collateral or trust arrangement changes. It is commonly called the '5% rule'.
Filing deadline = in principle, within 5 business days from the day after the reportable event occursExceptions: change reports for passive investment purposes are due by the 10th of the following month, and change reports for general investment purposes within 10 business days (FSS Corporate Disclosure Guide)
Three holding purposes
| Meaning | How to read it |
|---|
| Influence on management control | A purpose of influencing company management, such as appointing directors or amending the articles of incorporation | Reported on the detailed general form, with a cooling-off period during which additional purchases and exercising voting rights are prohibited until 5 days after the report. It can be a signal of a management control dispute. |
| General investment | Not aimed at management control, but the holder may demand things such as dividends or better governance | A short form, but it lists major contracts and how the funds were raised. It can be an advance notice of shareholder activism. |
| Passive investment | Purely for investment returns | Pension funds and asset managers often file for this purpose. Change reports are due by the 10th of the following month, so they reflect changes with a delay. |
Suppose Robin Bakery's 'Pureun Asset Management' (fictional) first bought 5.4% and filed for passive investment purposes, and a few months later changed its holding purpose to influence on management control and filed again. The meaning would be completely different. The purpose field comes before the numbers.
Insider ownership reports and pre-disclosure
Company executives and major shareholders (holders of 10% or more) file an even if they buy or sell just one share of their own company. If the 5% rule is a system for watching 'changes in control', this report is a system for watching 'insider trading activity'.
Since July 24, 2024, the has been added. When executives and major shareholders want to buy or sell 1% or more of total issued shares or KRW 5 billion or more in aggregate over the past six months, they must disclose the purpose, amount, and period of the trade at least 30 days before the trade begins (Financial Services Commission press release, 2024-07-09). The market can now know in advance before a CEO sells in large volume.
Common misconceptions
- "If a major shareholder sells, it's always bad news?"
- There are many reasons unrelated to company performance, such as paying inheritance tax, repaying a secured loan, or donating to a charitable foundation. Check the 'purpose of transaction' field in the pre-disclosure and the size of the sale first.
- "If a 5% report appears, that person has just bought?"
- Because of the filing deadline, there can be a gap of several days between the actual trade and the disclosure, and for passive-investment change reports up to over a month. Check the 'date of change.'
- "If foreign investors or institutions pass 5%, they are going after control?"
- Pension funds and asset managers mostly file for passive investment purposes. Don't judge until you have checked the holding purpose.
Quick checkA fund held 4.8% and bought another 0.5%, reaching 5.3%. Does it have to file a report?
Yes, it is a new report. It is because the fund reached 5% or more for the first time. After that, a change of less than 1 percentage point, such as from 5.3% to 6.1%, does not trigger a change report, but an increase of 1 percentage point or more, such as to 6.3%, requires another report.
STEP 3Reading ownership filing titles
With ownership filings, the title alone tells you roughly what happened. Let's practice deciding where to look next from the title.
The story of Dark Cloud Electronics' largest shareholder
Dark Cloud Electronics (fictional) had 1 million issued shares, of which the largest shareholder held 320,000 shares (32%). But as we saw in Lesson 31, if the KRW 6 billion CB is fully converted into shares at a conversion price of KRW 5,000, the share count becomes 2.2 million. Even if the largest shareholder sells nothing, the ownership ratio falls to 320,000 ÷ 2.2 million ≈ 14.5%. If a fictional investment partnership that bought the CB and converted it into shares ends up holding more than 15%, a title reading 'Change of largest shareholder' will appear in the filing list.
A change of largest shareholder is not bad in itself. But if CB conversions and largest-shareholder changes repeat within a short period at a loss-making company, it is an item for the red flag checklist in Lesson 34.
Ownership filing classification practice · 6 fictional filing titles Read each title and pick the most suitable interpretation.
The filing titles are fictional examples based on real form names. All company names are fictional.
Find it yourself on DART
As in Lesson 3, search for a company and select Ownership disclosure as the filing type, and large shareholding reports and insider ownership reports of executives and major shareholders appear in date order. The largest shareholder's stake is checked in the table 'Shares held by the largest shareholder and related parties' in the annual report's VII. Shareholders. Disclosures such as a 'change of largest shareholder' or those in the nature of pre-disclosure also appear in exchange disclosures ().
How to use it in investing
| What the filing shows | First check |
|---|
| Largest shareholder side's stake below 20% | Whether control could be shaken, and what the holding purpose of other holders of 5% or more is |
| Holding purpose changed from passive investment to influence on management control | Next filings, such as shareholder meeting agenda items or demands to appoint directors |
| Pre-disclosure of a large sale by executives or major shareholders | Purpose of the transaction, what percentage of issued shares the sale represents, and the selling period |
| Repeated changes of largest shareholder in a short period | CB conversion history (Lesson 31), operating cash flow (Lesson 21), audit opinion (Lesson 30) |
| Foreign or institutional ownership steadily rising or falling | Supply and demand flows together with changes in the earnings outlook |
Not always. Ownership filings only tell you 'who did what'; they do not tell you why or what the result will be. They only gain meaning when read together with the holding purpose, the purpose of the transaction and other financial numbers. This is educational material and does not recommend buying or selling any particular stock.
Quick checkThe CEO has pre-disclosed that he will sell 2% of issued shares over 3 months for the purpose of 'paying inheritance tax.' What should you look at first?
The size and period of the sale, and the largest shareholder side's stake after the sale. Even if the purpose is unrelated to company performance, 2% coming onto the market can weigh on supply and demand. Check the Chapter VII ownership table to see whether control remains stable after the sale.