Printed circuit board (PCB) maker TLB announced a large paid-in capital increase after its share price nearly quadrupled over the past year. The company said the funds are intended for investment to expand production capacity. Some investors, however, are concerned that the company is moving to raise capital at a time when the share price has surged, heightening overhang (potential selling volume) worries.
◇Share price jumps 288.22% in a year… company says it is to meet rising PCB demand
According to the Korea Exchange (KRX) on the 14th, KOSDAQ-listed TLB disclosed after the market closed on the 10th that it decided on a paid-in capital increase via a rights offering to existing shareholders followed by a public offering of forfeited shares, worth 120 billion won. The method grants preemptive rights to existing shareholders first, and any unsubscribed forfeited shares are then publicly offered to retail investors. The new shares to be issued are 2,073,000 shares, with an expected issue price of 57,900 won. The company aims to raise 120,026.7 million won in facility funds through this paid-in capital increase.
A bonus issue will proceed immediately after the paid-in capital increase. Setting July 20 as the record date after payment for the paid-in increase, the company plans to allot one bonus share for each common share held. The move is seen as an attempt to ease shareholders' subscription burden from the large facility investment and to increase trading liquidity by boosting 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 the close on this day, up 288.22% in a year. On the 9th, the share price rose intraday to 84,000 won, setting a 1-year high.
For the company, the higher the share price, the more efficiently it can raise the same amount of capital by issuing fewer shares. For investors, however, the increased share count can dilute per-share value and create a perception that the current price has reached a peak.
The company says it plans to use all funds raised from this paid-in capital increase for the construction of a second plant at its Vietnamese subsidiary (TLB VINA) and for building equipment lines in that plant. About 40 billion won will go to securing land, constructing buildings, and installing basic infrastructure, with the remaining 80 billion won used for investments in key process equipment.
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 noted, "We expect operating cash flow to increase going forward, but judged it would be insufficient to cover major facility investment costs, so we decided on this paid-in capital increase."
◇Investors also worry about a price peak… attention on whether it becomes a Financial Supervisory Service priority review case
Some shareholders are expressing concern about the company's paid-in capital increase announcement. One shareholder posted on the minority shareholder platform Act, asking, "With this paid and bonus issue announcement, shouldn't minority shareholders take action?" Another investor sharpened criticism in stock discussion boards, saying, "The more I think about it, the angrier I get that they are doing a paid-in capital increase when the share price is at a record high." One investor, however, offered the view, "Since it will be used for facility investment rather than paying down debt, it cannot be seen only as bad news."
There is also interest in whether TLB's paid-in capital increase will become a priority review case for the Financial Supervisory Service. Earlier, in Feb. last year, the FSS presented seven selection criteria for corporate paid-in capital increases subject to priority review, including the capital increase ratio and discount rate.
There are cases where, after becoming a priority review case for the FSS, a paid-in capital increase is actually withdrawn or an amended registration statement is requested. Most recently, the FSS demanded an amended registration statement from Hanwha Solutions, which announced a 2.4 trillion won paid-in capital increase. At the time, the FSS judged that, as a result of reviewing the securities registration statement, formal requirements were not properly met or entries on material matters were omitted or unclear, potentially hindering investors' reasonable judgment.
A Financial Supervisory Service official said, "As to whether an individual corporation is subject to priority review, we do not disclose it in principle because it could affect the stock price," and added, "For requests for amended registration statements, we disclose the fact after the market closes to minimize the impact on the stock price."
If there is any change regarding the paid-in capital increase, it is expected to be announced before the effective date specified in the securities registration statement, on the 25th of this month.