Meaning and Differences between Spin-off and Split-off, Stock Price Crash in the Case of Pharmaresearch

Hello, accounting and tax professionals! In the rapidly changing stock market, corporate spin-off issues are always important. Especially recently, the Phamar Research spin-off case has drawn the attention of many people. Why did the stock price plummet and 1 trillion won of market capitalization evaporate due to the news of the spin-off? Today, we will thoroughly analyze the meaning and differences between spin-offs and spin-offs through the Pharmer Research case and provide core information needed for practice.

https://www.youtube.com/watch?v=lra7ghFCFpU⁠⁠⁠⁠⁠⁠⁠

Table of Contents

Pharma Research Spin-off, What Was the Problem?
Spin-off vs. Split-off: Meaning and Key Differences
Risks of 'Duplicate Listing' and 'Stock Discount' Seen Through the Pharmer Research Case
Relationship between Controlling Shareholder Succession and Spin-off: Understanding Hidden Intentions
Q&A: Questions and Answers That Practitioners May Be Curious About

1. Pharmer Research Spin-off, What Was the Problem?

Q. Why did the Pharmer Research spin-off announcement lead to a stock price crash?
A. On June 13, 2025, Pharmer Research announced that it would separate its core aesthetic business (such as Lizranding) into a newly established corporation, 'Pharmer Research,' and convert the existing corporation into an investment holding company, 'Pharmer Research Holdings (tentative name).' This may seem like a typical spin-off, but the problem was in the subsequent plan. It was the fact that Pharmer Research Holdings announced that it would use the 'in-kind contribution rights offering' method to control the newly established Pharmer Research.
This, on the surface, takes the form of a spin-off, but in reality, it causes the same effect as a spin-off, causing a serious 'duplicate listing' issue. The stock price of the existing corporation (Pharmer Research Holdings), which has spun off its core business, will inevitably be discounted (discounted). In fact, the stock price plummeted immediately after the announcement, and the market capitalization evaporated by more than 1 trillion won. This resulted in enormous losses for existing shareholders, that is, minority shareholders.

2. Spin-off vs. Split-off: Meaning and Key Differences
There are mainly spin-offs and split-offs in corporate spin-offs that divide a company into two. It is important to accurately understand the meaning and differences because the two methods have distinctly different effects on shareholders.

Classification:
Spin-off:
Meaning: It is a method of dividing the existing company A into A' and B' and distributing the shares of the two companies to existing shareholders according to the shareholding ratio.
Shareholder Impact: Shareholders own all the shares of the two divided companies, and theoretically, they can fully enjoy the corporate value without a drop in stock price.
Application of Pharmer Research: On the surface, it is a spin-off, but it is trying to create a parent-subsidiary control structure similar to a split-off through an in-kind contribution.
Split-off:
Meaning: It is a method in which the existing company A separates a specific business division to establish a subsidiary B, and A owns 100% of the shares of B.
Shareholder Impact: Shareholders still only hold shares of company A and do not directly receive shares of company B. There is a high possibility that the parent company's stock price will be discounted when the subsidiary is listed.
Application of Pharmer Research: In the case of Pharmer Research, it is criticized for effectively aiming for the same duplicate listing effect as a split-off through an in-kind contribution after a spin-off.
Practical Tip: When encountering a corporate spin-off announcement, you should not only look at whether it is a 'spin-off' or a 'split-off', but also carefully examine the changes in the governance structure after the spin-off, especially the formation of a parent-subsidiary relationship.

3. Risks of 'Duplicate Listing' and 'Stock Discount' Seen Through the Pharmer Research Case

Q. Why does the Pharmer Research spin-off lead to the 'duplicate listing' issue and cause a 'stock discount'?
A. As explained earlier, Pharmer Research intends to create a structure in which the existing corporation controls the newly established corporation through an in-kind contribution after a spin-off. This is very likely to lead to a 'duplicate listing' in which the subsidiary, which has spun off its core business, is listed again.
The reason why duplicate listing is a problem is as follows.
Value Dilution: If one company is divided into two listed companies, investors will have to evaluate the same corporate value twice, so the intrinsic value may be diluted.
Parent Company Stock Discount: In particular, if a subsidiary that has separated its core business is listed, the parent company (in this case, Pharmer Research Holdings) will lose its 'valuable' business, so its value will be undervalued, and the stock price discount phenomenon will intensify. This directly leads to losses for existing parent company shareholders.
In the end, the Pharmer Research case is in a situation where it is difficult to avoid criticism for inducing a stock price discount of the parent company through a duplicate listing effect similar to a split-off under the guise of a spin-off.

4. Relationship between Controlling Shareholder Succession and Spin-off: Understanding Hidden Intentions

Q. How is corporate spin-off related to the succession of the controlling shareholder?
A. There are concerns that this type of corporate spin-off can often be used in the process of controlling shareholder succession. This is because it can be used as a loophole to reduce inheritance tax or gift tax by gifting the shares of the parent company, whose stock price has fallen, to children.
Inheritance Tax/Gift Tax Reduction: If the stock price of the parent company is discounted due to a corporate spin-off, the value of the parent company shares held by the controlling shareholder also decreases. If shares are gifted to children at this point, taxes are levied based on the lower value, thus reducing the overall inheritance tax or gift tax burden.
Strengthening Control: At the same time, the ability to maintain control over the core business through subsidiaries results in the effect of succeeding to the control of the entire company at a relatively low cost.
The Pharmer Research's spin-off plan is also under suspicion that it is not unrelated to this controlling shareholder succession. As an accounting/tax practitioner, it is very important to understand the purpose of the company's spin-off and the hidden intentions behind it.

5. Q&A: Questions and Answers That Practitioners May Be Curious About

Q. What is the position of the government or the market on this kind of spin-off listing like the Pharmer Research incident?
A. This 'spin-off listing' is pointed out as one of the main causes of the 'Korea Discount', and the government is also promoting improvements. In particular, from the time of candidate Lee Jae-myung, the negative stance on this form of corporate spin-off has been emphasized. Legal risks are being raised along with the suspicion of 'catching the last train' before the Commercial Act amendment. Pharmer Research will also hold an online IR at 10 a.m. on July 9 to explain this spin-off, so it would be good to refer to the relevant data.

The Pharmer Research spin-off case is an important case that shows the complex impact of corporate spin-offs on shareholder value and the succession of controlling shareholders, beyond the meaning and differences between spin-offs and split-offs. The key is to remember that it is not simply the name of the spin-off method, but the actual governance structure after the spin-off and the impact on shareholders.
Accounting and tax practitioners should pay attention to the following:
Carefully analyze the contents of the public announcement: If a public announcement related to a corporate spin-off is issued, carefully examine not only the spin-off method, but also the governance structure after the spin-off (especially the formation of a parent-subsidiary relationship), in-kind contribution plans, etc.
Diagnosis of 'duplicate listing' possibility: It is important to predict the possibility of the subsidiary's re-listing and the risk of a stock discount of the existing company.
Efforts to understand the intentions of the controlling shareholder: Consider the possibility of hidden intentions such as the succession of the controlling shareholder, in addition to the superficial purpose of the spin-off, and continuously monitor changes in relevant tax laws and regulations.
This Pharmer Research incident once again reminds us that we must continuously monitor and pay attention to whether corporate decisions are made transparently and fairly, and whether shareholder value is not being damaged. I hope it was helpful in practice.