Printed circuit board (PCB) manufacturer TLB announced a large paid-in capital increase after its share price nearly quadrupled over the past year. The company said the funds are for investment to expand production capacity. Some investors, however, are concerned that the company is moving to raise capital after a big run-up in the stock, heightening overhang (potential selling pressure) worries.
◇ Share price up 288.22% in a year… company says it is "responding to rising PCB demand"
According to the Korea Exchange (KRX) on the 14th, KOSDAQ-listed TLB disclosed after the close on the 10th that it decided on a paid-in capital increase via a shareholder allotment with a public offering of forfeited shares, totaling 120 billion won. Existing shareholders are first granted rights to subscribe to new shares, and any remaining forfeited shares not subscribed are offered to retail investors through a public subscription. The number of new shares to be issued is 2,073,000, with a tentative issue price of 57,900 won. The company aims to raise 120.0267 billion won in facility funds through this paid-in capital increase.
A stock dividend will also proceed immediately after the paid-in capital increase. Setting July 20, after the payment date, as the record date for the allotment of new shares, the company plans to grant one new share per one common share for free. The move is seen as aimed at easing shareholders' subscription burden from large-scale facility investments and boosting transaction liquidity by increasing the number of shares in circulation.
The issue is that TLB's share price has risen sharply recently. From 19,190 won on Apr. 11 last year, the stock climbed to 74,500 won at Tuesday's close, up 288.22% in a year. On the 9th, the share price hit an intraday high of 84,000 won, setting a 1-year high.
For the company, the higher the share price, the fewer shares it needs to issue to raise the same amount, improving fundraising efficiency. For investors, however, the increased share count can dilute per-share value and may signal that the current price has peaked.
The company says it plans to use all proceeds from this paid-in capital increase for the construction of a second plant at local subsidiary TLB VINA in Vietnam and for building equipment lines in that plant. It will spend about 40 billion won on securing land, constructing buildings, and installing base infrastructure, with the remaining 80 billion won going to key process equipment investments.
A company representative said, "It is urgent to expand production capacity to respond to the rapid increase in demand for high-performance memory module PCBs driven by growing AI server demand," and added, "We expect operating cash flow to increase going forward, but judged it insufficient to cover major equipment investment costs, so we decided on this paid-in capital increase."
◇ Investors also worry about a peak in the stock… attention on whether it becomes a Financial Supervisory Service priority review "target"
Some shareholders are expressing concern about the company's paid-in capital increase announcement. One shareholder wrote on the minority shareholder platform Act, "Regarding the paid and free capital increase announcement, shouldn't minority shareholders take action?" Another investor sharpened criticism in stock discussion rooms, saying, "The more I think about a paid-in capital increase when the share price is at a record high, the angrier I get." One investor, however, offered the view, "Since it will be used for facility investment rather than paying down debt, it cannot be seen solely as bad news."
There is also interest in whether TLB's paid-in capital increase will become a priority review target for the Financial Supervisory Service. Earlier, in Feb. last year, the FSS presented seven selection criteria, including the increase ratio and discount rate, for corporations' paid-in capital increases subject to priority review.
There are cases where, after becoming a priority review target by the FSS, a paid-in capital increase is actually withdrawn or a revised registration statement is requested. Most recently, the FSS requested a revised registration statement from Hanwha Solutions, which announced a paid-in capital increase of 2.4 trillion won. At the time, the FSS said that, based on its review of the securities registration statement, formal requirements were not properly met or important disclosures were omitted or unclear, potentially hindering investors' rational judgment.
A Financial Supervisory Service official said, "As to whether an individual corporation is under priority review, we do not disclose it in principle because it could affect the share price," and added, "To minimize the impact on the share price, we disclose any request for a revised registration statement after the market close."
If there are any changes to the paid-in capital increase, they will be announced before the effective date stated in the securities registration statement, on the 25th of this month.