On the 23rd, in early trading, T'way Holdings is plunging 14% on news it will proceed with a large-scale par value reduction without consideration to offset accumulated losses.
As of 9:53 a.m. that day, T'way Holdings is trading on the KOSDAQ at 261 won, down 44 won (14.43%) from the previous session. In early trading it changed hands at 253 won, marking a new 1-year low.
The previous day, T'way Holdings disclosed that it decided on an 80% par value reduction without consideration by consolidating five common shares into one. The record date for the reduction is July 3, and the listing of the new shares is scheduled for July 24.
After the par value reduction without consideration, capital will decrease from 56.6 billion won to 13.3 billion won. The number of shares outstanding will be reduced from 113.16 million to 22.63 million.
The purpose of this par value reduction without consideration is to improve the financial structure by offsetting accumulated losses. A par value reduction without consideration reduces capital to offset an equivalent amount of accumulated losses, which eases capital impairment on the financial statements and normalizes the capital structure.
However, because no cash actually flows in and the intrinsic value of corporations does not improve, par value reductions aimed at loss offsets are generally taken as a sign of financial weakness and weigh on the stock price.
T'way Holdings plans to finalize the decision through a shareholders meeting scheduled for June 19.