The Cautionary Tale of CT&T

I’m quite sad to see CT&T, a company I’ve written about for The Economist in the past, going through difficult times. CT&T is the world’s biggest independent maker of electric cars, and so with all the fuss about ‘green growth’ being made by the government and the chaebols, it has been really good to see an example of a firm that is genuinely doing something positive.

Pioneers—especially small, independent ones—usually don’t become great financial successes. Their fate is to be the unsung heroes, who unlock the door that someone else ends up walking through.

Pioneers—especially small, independent ones—usually don’t become great financial successes. Their fate is to be the unsung heroes, who unlock the door that someone else ends up walking through. Unfortunately, CT&T might end up in this category: they recently announced a quarterly loss of 51 billion won, and with the whole company now being valued by the market at 43 billion won, this is not something they can keep doing forever.

Their cars are not beautiful, but they are by far the cheapest electrics around that conform to accepted safety standards. The founder, a former Hyundai man named Lee Young-ki, got his start selling electric golf buggies, which were apparently a great success—but it seems he may be a little ahead of his time with regard to road cars. Revenue in the last quarter came in at just under 10 billion won, a 50 percent drop on the prior quarter.

Shares in CT&T, which traded for 1,400 won as recently as October, are now languishing at just 135 Won. There are serious questions about the company’s ability to survive. I really hope they can pull through.

I think there’s a lesson in stories like this for small investors: be careful about new companies that come along offering something radical or exciting. As a society, we need this kind of company, but as investors, the likes of CT&T have a greater than average tendency to lose us money. If you look at Naver Finance’s page for CT&T, you can see that it is one of the most popular stocks among individual Korean investors; however, you can also see that it has a distinct lack of big name institutional shareholders. That means that (other than the founders), most of the company’s stock is owned by office workers, housewives, the guy who owns the 슈퍼 (grocer) down the road, the lady who cuts your hair, and so on. These people all loved the fact that CT&T is doing something new and innovative—however, what they didn’t realise is that being new and innovative alone doesn’t necessarily translate into financial success.

Daniel Tudor

About Daniel Tudor

Daniel Tudor is the Korea correspondent for The Economist. His book, ‘Korea: The Impossible Country,’ will be published by Tuttle in spring 2011. He often uses obscure British expressions which you can look up here. Find out more at daniel-tudor.com

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