PNC Technologies, which directly controlled KwangMyung Electric, a KOSDAQ-listed company, has set up a limited liability company called HK Holdings and decided to shift to a structure that indirectly controls KwangMyung Electric. As KwangMyung Electric, mired in a management rights dispute, received a "disclaimer of opinion" from its auditor and faced the risk of delisting, the move is seen as the company's effort to craft a self-rescue plan.
PNC Technologies said on the 20th it will sell its 23.66% equity in KwangMyung Electric over the counter to HK Holdings. The sale price is 1,200 won per share. Established in March, HK Holdings is a limited liability company, and PNC Technologies will convert the proceeds from selling KwangMyung Electric shares to HK Holdings into debt-for-equity and end up holding 98.4% of HK Holdings.
PNC Technologies changed from directly holding equity in KwangMyung Electric to an indirect control structure by inserting an intermediary company.
PNC Technologies' reason for going through a cumbersome process to change KwangMyung Electric's governance structure is tied to the ongoing management rights dispute at KwangMyung Electric, which is facing a delisting crisis.
Originally, the largest shareholder of KwangMyung Electric was Cho Gwang-sik, chair of PNC Technologies. After selling the company's management rights to Naban Holdings in 2024, Cho bought the company back just over a year later, paying a premium. There was much talk at the time about Cho's sale and re-acquisition of the company, but the bigger problem was that PNC Technologies, which repurchased the company and became the largest shareholder of KwangMyung Electric, still failed to secure management control.
Immediately after the largest shareholder changed to PNC Technologies, KwangMyung Electric's board, despite severe and ongoing cash shortages, secured 10.1% equity in PNC Technologies through open-market purchases. The aim was to limit the new largest shareholder's voting rights.
Under the Commercial Act, when two companies own more than one-tenth of each other's shares, those shares are classified as "cross-held shares," and both sides' voting rights are restricted. PNC Technologies sought a court injunction to allow it to exercise voting rights, but the court dismissed the request.
With PNC Technologies failing to take control of KwangMyung Electric's board, the acquisition process is also running into setbacks. Because PNC Technologies has not secured a board majority at KwangMyung Electric, payment of the interim and final installments is being delayed.
As the dispute dragged on, KwangMyung Electric was pushed to the brink of delisting. Recently, KwangMyung Electric received a "disclaimer of opinion" from its external auditor on the 2025 fiscal year audit report. Under the listing rules of the Korea Exchange (KRX) main board, it met the criteria for delisting and was designated for administrative supervision. Unless an objection is filed with the Korea Exchange (KRX) by the end of this month, delisting procedures will proceed.
As of the end of last year, KwangMyung Electric posted a net loss of 70 billion won, and its current liabilities exceed its current assets by 60 billion won.
In particular, KwangMyung Electric has recognized large impairment losses related to business sites where it had responsibility-completion obligations in past real estate project financing (PF). The company said, "We are pursuing recovery of sales proceeds through discounted sales, PF loan maturity extensions, and refinancing," but the external auditor noted, "There is significant uncertainty that raises substantial doubt about the company's ability to continue as a going concern, meaning it may be unable to recover assets and repay liabilities through normal operations."
Given these circumstances, some analysts say PNC Technologies' move to set up a limited liability company and transfer KwangMyung Electric equity to it also takes into account a possible future sale of KwangMyung Electric. While limited liability companies face challenges in attracting investment and financing, they are not subject to external audits and disclosure requirements, making transactions such as sales simpler.
In addition, the transaction is expected to serve as a "firewall" to block KwangMyung Electric's worsening financial risks from spilling over to PNC Technologies.
Regarding this, PNC Technologies said, "Our determination to normalize KwangMyung Electric is unchanged," adding it is "part of the work to convert into a holding company."