Hello, everyone, did you have a nice dinner?
While thinking about the single-stock leverage issue that is shaking our country these days, I'm writing this post.
The government must be very concerned, but it seems like immediate delisting is not possible.
Over the past 3 weeks, the KOSPI index has plummeted more than 22%, and single-stock leverage has crashed around 40-50%.
There must be countless shareholders who entered near the all-time high and have already suffered tens of percent losses, but if the government suddenly delists it and compensates at the current price, recovery becomes extremely difficult.
Those who have used leverage would be familiar with this, but to recover from a 50% loss, you need a 100% gain ㅠㅠ;
( 1,000,000 won → -50% → 500,000 won → +100% → 1,000,000 won )
If you lost about 10%, you can recover with just about 11% gains, but the higher the loss rate, the harder it is to recover...
So the problem is, you suffered losses at 2x leverage, but if they delist it and tell you to recover through a regular stock, you don't know how long it will take or if recovery is even possible. Won't there be lawsuits for property rights violations?
So I think there are two possible options the government could try:
1. Compensate single-stock leverage holders for losses up to their original investment amount and then 'immediately' delist
This could be processed the fastest, but honestly I'm not sure if it's possible.
It would probably require trillions in taxes, so there would be an uproar.
Public opinion is demanding the elimination of single-stock leverage, but if it actually comes down to compensating losses with taxes, people won't just stand by;; Even if the market stabilizes quickly, I think people will still react this way.
"Didn't you know it was gambling? You should bear the loss yourself"—most people will say things like that, but from the perspective of shareholders who lost 50%, being told to recover from 2x losses on your own at 1x speed doesn't make sense.
2. After prior notice, when leverage product prices return to all-time high levels and holders have recovered some losses, lower the multiplier to 1.5x or delist
(While 2x might be acceptable if leverage products are created for other blue-chip stocks like Samsung Electro-Mechanics, Samsung Electronics and SK Hynix have such a large weight in KOSPI that 2x seems somewhat unreasonable. I'm not sure if shareholders will adapt and volatility will ease over time, but based on the current situation, I don't think so.)
The problems with this approach are: 1) it assumes the KOSPI index will turn upward soon, and 2) since regular leverage and inverse leverage have opposite profit directions, they need to be handled separately.
3. Block new purchases of single-stock leverage going forward
(I remember this being mentioned by someone else in another post, but I don't remember the ID.)
Existing shareholders have been burned in this 3-week crash (I hope this 3-week period is the end...), and I think the number of people doing long-term investments with single-stock leverage will naturally decrease once there's some recovery.
(Edit) But thinking about it, existing shareholders will eventually need to sell to someone to get out, and if there are no new purchases, existing shareholders will have to keep buying, so unless one person takes everything, this method is also impossible;;;}
In the end, the only option left would be for the government to purchase and delist or reset to 1.5x...
I'm curious about other people's opinions, and I wonder if there might be a better solution.
