Biotech company Cha Biotech and GI Innovation announced a shareholder allocation of a paid-in capital increase on Friday, 20th, leading to a sharp drop in stock prices in after-hours transactions following the market close.
Cha Biotech's stock finished after-hours trading at 13,380 won, dropping 9.96% (1,480 won) from the closing price of 14,860 won. GI Innovation's stock also ended after-hours trading at 8,300 won, a decline of 9.98% (920 won) from the closing price of 9,220 won. The maximum drop in after-hours trading was -10% compared to the closing price.
It seems that many investors began selling following the announcements of the paid-in capital increase from both companies. Cha Biotech disclosed that it would pursue a paid-in capital increase of 250 billion won after the market closed. Cha Biotech plans to allocate 23,148,150 new shares at 10,800 won each to shareholders, with any unallocated shares being offered to general investors. The volume of new shares from Cha Biotech accounts for about 41% of the number of existing issued shares.
Of the 250 billion won raised through the capital increase, Cha Biotech plans to invest 110 billion won in its affiliate Cha Healthcare and Matica Holdings. One hundred billion won will be allocated for research and development, while 20 billion won each will be used for production facilities and working capital.
GI Innovation also disclosed the decisions regarding paid-in and free capital increases after the market closed on the same day. GI Innovation plans to conduct a free capital increase, allocating 10 new shares per share after the paid-in capital increase of 80 billion won. GI Innovation intends to use all funds raised from the paid-in capital increase for working capital.
As high-interest rates continue, it appears that corporations with large debts are reaching out to shareholders. A financial investment industry source noted, "As the U.S. adjusts the pace of interest rate cuts, South Korea may also be affected," adding, "Cases announcing capital increase plans could increase further by the end of the year."