SOCAR, a KOSPI-listed company and Korea's largest car-sharing corporations, said it will support its subsidiary Nine2one with a paid-in capital increase of 18.3 billion won. Nine2one, a 100% subsidiary of SOCAR that operates the shared e-bike brand "Elecle," had its planned absorption merger with SOCAR withdrawn in June.
The support will effectively take the form of a debt-to-equity swap that repays a loan with shares. As of the end of Sep., Nine2one had borrowed 18 billion won from SOCAR, and the paid-in capital increase will be used to offset this debt.
Market views are mixed. That is because Nine2one, launched in 2018, has not posted a net profit even once. Some investors are voicing concerns that pouring money into a subsidiary without guaranteed profitability is like "pouring water into a bottomless jar."
After the market closed on the 26th, SOCAR disclosed that it would participate in Nine2one's 18.3 billion won paid-in capital increase. The issuance was carried out via a rights offering, issuing a total of 183 million shares at 100 won per share. SOCAR completed payment on the disclosure date, and the base date for dividends on the new shares is the 31st. SOCAR said the purpose of the paid-in capital increase is to improve the subsidiary's financial structure.
SOCAR made a seed investment in Nine2one starting in 2019 and acquired all of its shares in 2021, making it a subsidiary. It invested about 26.4 billion won in total. The acquisition was part of a growth strategy to move beyond being a short-term rental car operator and secure a first-mover position across the broader shared mobility space.
But Nine2one has not broken out of weak results. It swung to an operating loss of 2.4 billion won last year and posted a net loss of 5.1 billion won. Since becoming a SOCAR subsidiary, it has never recorded a net profit. As of the end of Sep., total equity was minus (-) 8.8 billion won, indicating a state of complete capital impairment.
Perhaps due to this financial burden, SOCAR announced in Apr. that it would strengthen competitiveness through an absorption merger of Nine2one, only to withdraw the decision just two months later. At the time, the company said, "As a result of a comprehensive review to effectively respond to the rapidly changing personal mobility (PM) market environment, we decided not to proceed with the merger."
For reversing its disclosure on the merger, the Korea Exchange (KRX) designated SOCAR as an unfaithful disclosure entity and imposed a disclosure violation penalty of 8 million won.
SOCAR recorded operating losses of 9.7 billion won in 2023 and 9.8 billion won last year, but it posted 10.1 billion won in operating profit through the third quarter this year, showing signs of recovery. However, as the profitability and financial condition of subsidiary Nine2one deteriorate, the parent's burden of financial support is growing, becoming an obstacle to improving SOCAR's overall financial structure.
Meanwhile, SOCAR's share price has continued to fall since its listing in Aug. 2022. This year, it fell 36.4% from 18,200 won to 11,580 won on the 29th. According to NH Investment & Securities' Namu app, the average return of individual investors is minus (-) 38.5%, with 97.3% of investors in the red.