What is relational risk — Human Risk, Funding Risk, Governance Risk

key questions

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Why do some companies' stock prices plummet just before delisting?

Do controlling shareholders really suffer ‘losses’ during the delisting process?

Why are individual investors always left last?

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Paper Overview

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Title: Stock Market Delistings and Company Undervaluation

Author: B. Schwetzler, P. Pollmann

Source: SSRN Working Paper, 2024

Analysis target: Stock price, share structure, and pattern of damage to minority shareholders of delisting (including voluntary delisting) companies

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Key Finding: Cryptocurrency Designs Undervaluation

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In the process of voluntary delisting, the controlling shareholder proposes a low-price tender offer to minority shareholders.

The tender offer price is often discounted compared to the market price.

Minority shareholders have the dilemma of holding on to illiquid shares if they sell them before delisting or not.

Result: Minority shareholders' wealth is transferred to controlling shareholders.

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Even if there are regulations, exploitation continues.

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Damage to minority shareholders continues even after tightening of tender offer regulations (squeeze-out regulations) in some European countries

Reason: When the regulatory fair value standard itself is interpreted in favor of controlling shareholders.

Information asymmetry: Controlling shareholders know the company's internal value, but minority shareholders only have publicly available information.

Conclusion: The risk of structural exploitation remains regardless of the existence of regulations.

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Connection to the Korean market: trading suspension of 276 companies

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RaymondsRisk empirical analysis: Preliminary capture of 85.9% of 276 companies subject to KOSPI·KOSDAQ trading suspension

What this number means: Stock closing and trading suspension are not accidents, but structural processes that can be detected in advance.

Leading signs of relational risk:

Rapid increase in CB issuance (Funding Risk)

Increased replacement of executives and concurrent positions (Human Risk)

Sudden change in governance structure (Governance Risk)

When these three things move at the same time, the probability of bankruptcy rises sharply.

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Scenario of bankruptcy (typical pattern)

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Step 1: Top power issues private CB → Transfuse corporate funds

Step 2: Replace board of directors → Take control of management

Step 3: Stimulate stock prices → Sell off peak power after conversion

Stage 4: Stock price plummets → individual investors panic

Step 5: Trading suspension or delisting → Only individual investors remain

Schwetzler (2024): This process is structured by design and is repeated in regulatory environments as well.

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Evangelist's Conclusion

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Bankruptcy = not investment failure. It is the completion of structural exploitation.

When financial statements look good, signals of relational risk have already begun.

What Individual Investors Need: Leading Signals of Relationships and Fund Flows, Not Financial Numbers

RaymondsRisk exists to score these signals and provide them to individuals.

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■ Reference materials

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Schwetzler, B., & Pollmann, P. (2024). Stock Market Delistings and Company Undervaluation. SSRN Working Paper. https://ssrn.com/abstract=4666576

RaymondsRisk Whitepaper. https://www.connect-ai.net/whitepaper