Samsung SDI decided to issue new shares worth 2 trillion won to expand its production capacity. Rather than utilizing its stake in Samsung Display, the company has opted for a large-scale capital increase to secure funding, but the stock price fell sharply after the capital increase announcement. The key to the success of this funding plan is whether the stock price can maintain its current level without further decline.
The issuance price of the new shares to be issued by the company during the capital increase will be decided based on the stock price trend going forward. To secure the initially planned 2 trillion won, the stock price needs to remain in the range of 190,000 to 200,000 won. Furthermore, since the Financial Supervisory Service selected Samsung SDI's capital increase as the first 'priority review target,' there is also a possibility that authorities may intervene if the stock price falls further.
Samsung SDI's stock is trading around 189,000 won in the afternoon of the 17th, down about 1% from the previous trading day. This is the lowest level since March 2020 when the COVID-19 pandemic began. After announcing the capital increase plan on the 14th, the stock price has continued to decline following a drop of 6.18% (12,600 won) on that day.
Earlier, Samsung SDI planned to issue 11,821,000 new shares through a rights offering and public offering to secure over 2 trillion won. The company intends to invest the funds raised in domestic all-solid-state battery production facilities, a joint venture with General Motors (GM), and its subsidiary in Hungary by 2026.
According to the company's announcement, the current stock price must be maintained to secure 2 trillion won. The expected issuance price per new share is 169,200 won. The first and second issuance prices will be determined on April 15 and May 22, respectively. During this period, a discount rate of 15% will be applied to the weighted arithmetic average stock price based on trading value and volume. Simply put, the average stock price must remain above 194,500 won to achieve the target of 2 trillion won.
Securities firms believe the likelihood of the stock price falling further is low. Some analysts express disappointment that Samsung SDI chose the capital increase method instead of utilizing its stake in Samsung Display. However, they also noted that it appears to be the best option from the company's perspective.
As of the end of last year, Samsung SDI holds a 15.2% stake in Samsung Display, valued at 4.8371 trillion won based on book value. Jeong Kyung-hee, a researcher at LS SECURITIES, noted, "Despite having sellable assets, it is disappointing for investors that Samsung SDI has opted for funding through equity. The dilution effect from the increase in the number of shares and the method of funding for the capital expenditure (CAPEX) may contribute to a decline in the stock price for some time."
However, considering that Samsung SDI received more than 1 trillion won in dividends from Samsung Display last year, it is also assessed that opting for a stake sale may not have been easy. There is also an opinion that the burden of additional capital increases has decreased as funds can now be secured by utilizing the stake in Samsung Display.
Kang Dong-jin, a researcher at Hyundai Motor Securities, stated, "Since Samsung SDI is considering the possibility of utilizing its stake in Samsung Display, the potential for additional funding in the future is limited. It is also expected that the company will make further investments in its own factories in the North American market rather than in joint ventures."
The stock price trend of Samsung SDI may also affect the approval of the capital increase plan by financial authorities. The Financial Supervisory Service has selected this capital increase of Samsung SDI as the first 'priority review target.' Once designated as a priority review target, the Financial Supervisory Service will intensively examine the relevant securities registration statement within a week and conduct at least one face-to-face consultation with the company. Given that minority shareholders hold 61.72% of Samsung SDI's shares, procedures and plans for shareholder protection are expected to be reviewed.
The Financial Supervisory Service has rejected several publicly traded companies that attempted capital increases. ISU PETASYS and Korea Zinc are representative cases. Both have in common that their stock prices fluctuated and there was significant backlash from ordinary shareholders following the announcement of the capital increase.
Whether Samsung Electronics, the largest shareholder of Samsung SDI, can fully absorb the allocation or subscribe in excess will be crucial for the stock price. If the largest shareholder does not fully absorb the subscription, the amount available to ordinary investors will increase, making it difficult for them to interpret this capital increase positively. Samsung Electronics plans to decide how much to subscribe at a board meeting.
The relatively low capital increase ratio (16.8%) and discount rate (15%) of Samsung SDI are positive factors. Since 2020, 11 publicly traded companies have raised over 1 trillion won through capital increases, with their average increase ratio at 31.4% and average discount rate at 19.1%. The four companies that raised more than their initial targets shared a commonality of capital increase ratios below 30%.
Jumin Woo, a researcher at NH Investment & Securities, noted, "Currently, Samsung SDI's stock price is trading at a price-to-book ratio (PBR · market capitalization ÷ net worth) of 0.6. Rather than worrying about additional declines, I believe it is time to consider rebounds reflecting the dilution (due to the capital increase)."