The process of a paid-in capital increase allocated to shareholders is becoming a popular investment destination for general investors, as existing shareholders did not subscribe to the shares, resulting in unexercised rights. In line with the bullish market, share prices are rising, allowing the purchase of relatively cheap new shares to be sold at a higher price.
Hyungji Global's stock was traded at 3,375 won on the KOSDAQ market at 9:55 a.m. on the 28th. The stock price fell by 20.31% (860 won) compared to the previous trading day. The significant drop in Hyungji Global's stock price is believed to be because the day was the rights selling day for new shares from the paid-in capital increase.
Rights selling refers to the practice where individuals who have the right to receive new shares through a paid-in capital increase sell the new shares two trading days before their listing to secure revenue.
Hyungji Global initiated a paid-in capital increase allocated to shareholders to secure 19.2 billion won for operational funds. The core idea was to issue 6 million new shares at 3,200 won per share. Approximately 1.44 million unexercised shares emerged, and public subscription was conducted for general investors, achieving a competition rate of 179.8 to 1 (subscription amount of 828.5 billion won).
Although Hyungji Global's stock price dropped sharply that day, those who participated in the subscription for the unexercised shares and received new shares benefited. This is because the current stock price is higher than the new share issuance price. If calculated simply without considering fees, the return based on the current stock price is about 5.5% (175 won).
Those who invested in the unexercised shares from the paid-in capital increases of Hanwha Aerospace and Bukwang Pharmaceutical saw even greater profits.
Hanwha Aerospace conducted a paid-in capital increase issuing 4,267,200 new shares at 684,000 won each, raising about 29.188 trillion won. This was the largest paid-in capital increase in history. Approximately 17,656 unexercised shares were issued, and public subscription was conducted, recording a competition rate of 227.6 to 1 (subscription amount of 27.497 trillion won).
On the rights selling day for Hanwha Aerospace, which was on the 17th, the average selling price of individual investors was 897,923 won (transaction amount ÷ transaction volume). Excluding other expenses, it is estimated that a revenue of 26.9% (183,923 won) was achieved per new share. If sold on the listing day of the new shares, the estimated revenue could have been as high as 34.2% (236,659 won).
Bukwang Pharmaceutical also proceeded with a paid-in capital increase, issuing 30,210,000 new shares at 2,955 won each, raising about 8.93 billion won. After the paid-in capital increase for existing shareholders, 5,014,611 unexercised shares were issued, and the public subscription recorded a competition rate of 87.9 to 1 (subscription amount of 13.026 trillion won), indicating a successful outcome.
On the rights selling day for Bukwang Pharmaceutical, which was on the 24th, the average selling price of individual investors was 3,317 won. This was 12.3% (362 won) higher than the new share issuance price.
Generally, when conducting a paid-in capital increase, the number of issued shares increases, which dilutes the stock value, often resulting in a decline in stock prices. It has frequently happened that stock prices fall below the paid-in capital increase price for new shares. It is also common for the securities company that manages and underwrites unexercised shares to retain them.
However, this year, as the domestic stock market hit a low in April and showed a bullish trend, the atmosphere has changed. After the issuance price of the new shares was determined, the stock price began to rise further, leading to an increase in the popularity of unexercised shares.
For instance, the stock price of Hanwha Aerospace was determined by applying a 15% discount rate to the weighted arithmetic average share price that reflects the trading volume from April 21 to May 20. At that time, Hanwha Aerospace's stock price hovered around 800,000 won, and currently, it has surpassed the 900,000 won mark, allowing those who successfully subscribed to the unexercised shares to achieve investment results.
The performance relative to opportunity cost is not bad either. To receive one unexercised share from Bukwang Pharmaceutical's paid-in capital increase, an investment of 250,000 won was required. This implies that if this amount had been placed in a CMA account with an annual interest rate of 2.5%, one would have forfeited 0.034% (85 won) in guaranteed interest, considering it took 5 days to receive the repayment after subscription. However, even after accounting for a 0.15% securities transaction tax, more than 250 won remained.
The problem is that as the popularity of unexercised shares in paid-in capital increases, it has become increasingly difficult to obtain even one share. POSCO FUTURE M conducted a public offering of unexercised shares from the paid-in capital increase from the 24th to the 25th, attracting a record-high subscription deposit of 8.62 trillion won. The competition rate exceeded 350 to 1, and it was estimated that around 34 million won needed to be subscribed based on the new share issuance price of 964,000 won to receive one share.
Unexercised shares from paid-in capital increases do not necessarily guarantee short-term revenue, and one must keep in mind that a substantial amount of money is tied up for a certain period regardless of the success of the subscription. In the case of POSCO FUTURE M, the remaining balance after the allocation of new shares will be refunded to accounts two trading days (July 29) after the subscription deadline. This effectively restricts the use of funds for about 5 days, including the weekend.