As Hanwha Solutions' stock plunged after it released a large shareholder-allotted paid-in capital increase to repay debt, parent company Hanwha is reviewing a plan to participate at a level of 100% or more. In the industry, there is talk that parent Hanwha could inject about 1 trillion won.
Investor attention is also focused on whether the National Pension Service, which holds equity in Hanwha Solutions, will take part in the paid-in capital increase. The National Pension Service, a major shareholder of Hanwha Solutions, cast a vote in favor of the related articles of association amendment at the shareholders meeting held earlier.
The Financial Supervisory Service selected Hanwha Solutions' paid-in capital increase for focused review, considering the size of the issuance and the impact on existing shareholders.
According to Mirae Asset Securities, to maintain its 36% equity stake in Hanwha Solutions, the largest shareholder Hanwha is estimated to need 870 billion won based on the current planned issue price (33,300 won). However, if it applies for more than the allocation based on equity, it would have to inject more than 870 billion won.
Given the strong backlash from retail shareholders against the paid-in capital increase decision, it is highly likely the parent company will provide substantial funds for this paid-in capital increase.
Attention is also on whether the major shareholder National Pension Service will participate in the paid-in capital increase. The National Pension Service holds 5.75% equity in Hanwha Solutions. The National Pension Service is usually reluctant to join paid-in capital increases, but it has made different case-by-case judgments, including participating in the paid-in capital increase related to Korean Air Lines' acquisition of Asiana Airlines in 2021.
In addition, the National Pension Service paved the way for this paid-in capital increase by casting a vote in favor of the related articles of association amendment at the regular shareholders meeting held just before Hanwha Solutions released the paid-in capital increase.
Meanwhile, the Financial Supervisory Service (FSS) said it will conduct a focused review of Hanwha Solutions' paid-in capital increase decision. It plans to scrutinize the securities registration statement intensively for seven business days and hold at least one in-person consultation with the company. The effective date is on the 10th of next month, but it could change depending on any requests for correction.
The FSS's focused review, introduced in Feb. last year, is a system to examine paid-in capital increase plans that could harm shareholder rights and interests closely and swiftly. Previously, the paid-in capital increases of Hanwha Aerospace and POSCO FUTURE M were selected for focused review, and their schedules were delayed by one to two months through the process of correcting the filings.
Since Hanwha Solutions plans to use more than 60% of the funds it secures to improve its financial structure, withdrawing the issuance would not be easy.
The company implemented self-rescue measures over the past two years, including asset sales and issuing 700 billion won in hybrid securities, but the liability ratio has instead worsened over the past three years from 167% to 196%. Hanwha Solutions plans to allocate 20% of the new shares to the employee stock ownership association first.
Investor discontent has been growing since the paid-in capital increase was released. The issue price was set at a level discounted by 26% from the closing price the day before the announcement (45,000 won), which also had an impact. On the day of the disclosure, the stock plunged more than 18%, and it is down more than 5% intraday today as well.
According to the minority shareholder platform Act, about 1,800 minority shareholders of Hanwha Solutions oppose the issuance decision and plan to submit a petition to the Financial Supervisory Service (FSS) calling for a strict review of procedural legality and shareholder protection measures.