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Watchdog halts Hyundai Motor Securities' $140 mil. capital increase plan
Pedestrians pass by the Financial Supervisory Service's headquarters in Seoul in this undated photo. Korea Times file
By Jun Ji-hye
Stock price decline caused by rights offering announcement draws backlash from shareholders
The Financial Supervisory Service (FSS) has put the brakes on Hyundai Motor Securities’ plan for a capital increase worth 200 billion won ($140 million), requesting a corrected filing for the securities registration statement it submitted on Nov. 27.
The financial watchdog requires a corrected filing if the submitted statement is improperly formatted, contains false information, omits details or has unclear representations of important matters.
Upon the correction request, the effectiveness of the statement submitted by the securities firm was suspended. If a corrected filing is not submitted within three months, it will be considered withdrawn.
Hyundai Motor Securities has been planning a rights offering to raise approximately 200 billion won for facility funds and other purposes. The new shares to be issued through the capital increase would total 30,124,482 shares, which represents 94.9 percent of its existing total shares, marking a significant size.
Following this announcement, the firm’s stock price dropped by 13.07 percent on Nov. 27 compared to the previous trading day.
The continued announcements of rights offerings by listed companies have led to a decline in stock prices, sparking a backlash from minority shareholders.
On Thursday, the shares of Isu Petasys closed at 21,100 won, down 13.52 percent from the previous day. During intraday trading, the stock price even fell to 21,000 won, marking a 52-week low.
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The sharp decline in the stock price of the printed circuit board manufacturer followed the firm’s announcement that it will push again for a rights offering worth 550 billion won. The number of new shares to be issued through this capital increase will account for approximately 31.8 percent of the total shares currently outstanding.
The purpose of the plan is to acquire a stake in JEIO, which manufactures carbon nanotubes, a secondary battery material.
The Isu Petasys first announced its rights offering plan on Nov. 8, after which its stock price plummeted. However, after the FSS rejected its securities registration statement and requested a corrected filing on Dec. 2, the stock price partially recovered.
The stock price then fell again after the firm submitted the corrected filing and announced its decision to proceed with the plan.
Minority shareholders are opposing the JEIO acquisition plan, arguing that it does not contribute to the company’s growth potential and instead undermines shareholder value.
An alliance of these investors has filed complaints with the FSS and the Korea Exchange, while also holding a protest using trucks in front of the firm’s Seoul office. Additionally, they are recruiting shareholders through an online platform to organize shareholder actions.
“It seems that Isu Petasys’ shareholders do not understand why the company is not investing in the future of semiconductors but instead plans to acquire a carbon nanotube manufacturer,” an official in the financial investment industry said.
“There has not been enough communication with shareholders, which is why there is so much controversy about this issue.”