Hyungji Group's subsidiary Hyungji I&C's large-scale paid-in capital increase defied predictions of market participants and quickly obtained approval from the Financial Supervisory Service (FSS). It took exactly three weeks from the initial announcement to the effective date. This contrasts with other listed companies, such as CHA Biotech, which experienced difficulties in getting FSS approval after about four months.
Hyungji I&C plans to issue new shares amounting to 90% of the existing issued shares, and during the paid-in capital increase process, it has attracted much more funding than initially expected by becoming associated with Lee Jae-myung-themed stocks. This is because the stock price has tripled since the announcement of the paid-in capital increase.
The company is maintaining a neutral stance, but the problem lies with the investors. Coincidentally, the subscription for the paid-in capital increase will take place at the end of May, with the new shares to be listed on June 11, after the presidential election on June 3. Generally, thematic stocks like political themes tend to find their true value after the material fades away, so shareholders of Hyungji I&C are increasingly worried about whether the stock price can hold up when the large number of shares are listed on June 11.
According to the Financial Supervisory Service's electronic disclosure system on the 17th, Hyungji I&C announced its plan for a paid-in capital increase on the 21st of last month. The number of new shares to be issued is approximately 28.5 million, accounting for about 90% of the existing shares (over 31.54 million). Furthermore, it has decided to use more than half of the funds raised for debt repayment.
Shareholders naturally reacted negatively to the decision for the paid-in capital increase. On the first trading day after the announcement, which was on the 24th of last month, Hyungji I&C's stock price plummeted by 26% from the previous trading day (1,054 won) to 783 won.
However, shortly thereafter, a reversal occurred. As expectations for an early presidential election grew, Hyungji I&C's stock price surged due to its association with Lee Jae-myung-themed stocks. Hyungji I&C is a subsidiary of Hyungji Fashion Group, which is known for its elite school uniforms. Moreover, Lee Jae-myung had previously promised to provide free school uniforms, which is why the company is categorized as a Lee Jae-myung-themed stock. As of the close on the 15th, Hyungji I&C's stock price rose to 2,355 won, approximately three times higher than right after the announcement of the paid-in capital increase.
With the rise in stock price, the price of the paid-in capital increase has also significantly increased. The initial offering price for the paid-in capital increase was set at 704 won per share, but it has now risen to about 1,379 won (based on the first offering price). However, this is not the final price and will be determined on May 21, taking future stock price movements into account.
Considering that a failing corporation is conducting a large-scale paid-in capital increase and that the purpose of the increase is debt repayment, investors expected that the FSS might intervene to halt the paid-in capital increase. This is because most KOSDAQ companies, as well as large companies like Samsung SDI and Hanwha Aerospace, are currently revising their securities registration statements after being blocked by the FSS.
However, the FSS announced on the 11th that the effectiveness of the securities registration statement had been established, and on the 14th, even the public announcement regarding Hyungji I&C's rights cut was released. A rights cut refers to the adjustment of the stock price due to a paid-in capital increase. For investors, it is as if they have crossed a river that they cannot return from.
Investors are concerned that investing in Hyungji I&C's paid-in capital increase could lead to considerable losses due to the political schedules. The record date for the allocation of new shares from Hyungji I&C's paid-in capital increase was the day before (the 16th), with the subscription date set for the next month, on the 26th to 27th. The stocks will be listed after the presidential election on June 11.
Investors currently holding shares must decide on whether to participate in the paid-in capital increase, and by the end of May, they need to invest more funds to receive shares. They must make a decision in a situation where it is uncertain what the stock price will be on June 11.
In relation to this, the FSS indicated that it conducted a focused review of Hyungji I&C and confirmed that the documents were supplemented through voluntary correction.
An FSS official noted, "We have closely examined this case, but as is the principle with other cases, we do not get involved in the method or process of the paid-in capital increase." He added, "However, we assess this corporation as having risks and will continue to monitor it until the subscription begins."
Hyungji Group's subsidiary Hyungji I&C is not the only one conducting a paid-in capital increase. Hyungji Global is also in the process of a large-scale paid-in capital increase. On the 1st, when the stock price skyrocketed as a Lee Jae-myung-themed stock was identified, Hyungji Global decided on a paid and unpaid capital increase. The market is speculating that this attempt could be a means to raise a large amount of funds given the thematic stock fever that caused the stock price to rise sharply. Hyungji Global's stock price was around 2,700 won before being identified as a themed stock but rose to about 10,850 won as of the close on the 15th, an approximate fourfold increase.
Hyungji Global's securities registration statement for its paid and unpaid capital increase has not yet taken effect. On the 16th, just a day before its effectiveness, the company voluntarily corrected its statement due to early redemption of convertible bonds and the finalization of the presidential election schedule, thus scheduling the effectiveness for the 1st of next month. However, unlike Hyungji I&C, the subscription for Hyungji Global will take place after the presidential election, on June 19 to 20.