Taekwang Industrial's decision to issue exchangeable bonds (EB) based on all of its own shares led to a sharp drop in stock prices. Investors who had expected the stock price to rise following the share buyback seem to have begun selling.
Taekwang Industrial's stock was traded at 1,007,000 won at 9:08 a.m. on the 30th in the KOSPI market. This represented an 8.7% (96,000 won) decline from the previous trading day. In early trading, the stock price fell to 990,000 won, relinquishing its position as a 'blue chip' stock (over 1 million won per share). It is the first time since the 5th that Taekwang Industrial's stock price has dropped below 1 million won.
On the 27th, Taekwang Industrial held a board meeting and approved the issuance of exchangeable bonds worth 320 billion won, targeting all of its own shares (271,769 shares). Taekwang Industrial's shareholding ratio is 24.41% of the total number of issued shares.
Taekwang Industrial said it would issue exchangeable bonds to raise funds for new business initiatives. However, disappointed investors, who had expected the stock price to rise due to the buyback, resorted to selling. A share buyback reduces the number of issued shares, increasing the value per share.
Truston Asset Management, the second-largest shareholder of Taekwang Industrial, also expressed opposition. Truston Asset Management evaluated the decision to issue exchangeable bonds as "not a rational business judgment but a trick to avoid the recent amendments to commercial law and shareholder protection policies being promoted by the government." They announced plans for legal action, including filing for an injunction to stop the issuance of the exchangeable bonds.