Hyulim Robot, with a market capitalization reaching 1.4 trillion won, is drawing growing skepticism from shareholders as it moves ahead with a small paid-in capital increase worth just 1 billion won. Despite not facing a shortage of on-hand cash, it chose a public offering to raise funds, which critics said instead stoked unnecessary liquidity concerns in the market.
According to the Financial Supervisory Service's electronic disclosure system on the 28th, Hyulim Robot will conduct a paid-in capital increase by public offering worth 1 billion won on June 1–2. The issue price for the new shares is 10,090 won, about a 15% discount to the reference price. The number of shares to be issued is 99,108 common shares, just 0.08% of the existing total outstanding shares (119,457,197).
The raised funds will be used to acquire securities of another company. While the specific investment target was not disclosed, the possibility is being discussed that the funds will be used for an investment in Hyulim A-Tech, an affiliate that announced a paid-in capital increase the same day. The company said, "It is difficult to clearly disclose a specific company name at this time."
What stands out in this paid-in capital increase is how small the amount is. While Hyulim Robot's market capitalization is about 1.4 trillion won, the capital increase totals 1 billion won, just 0.07% of its market cap. The ratio to shareholders' equity is likewise around 0.44%.
Its sound financial condition also raises questions about the fundraising. On a consolidation basis, Hyulim Robot has assets of 134.9 billion won, liability of 69.8 billion won, and equity of 227.3 billion won, with a debt ratio of about 30%. However, cash and cash equivalents stand at 19.9 billion won, while current liabilities are 66.8 billion won, making it hard to say short-term liquidity is ample.
Because of this, many minority shareholders say they cannot understand why the company pulled out the paid-in capital increase card just to raise a small 1 billion won. As of the end of last year, Hyulim Robot had 250,000 minority shareholders.
A paid-in capital increase, one way corporations raise capital, is viewed in the market as a typical negative factor due to equity dilution. Moreover, when the raised amount is trivial and the use of proceeds is unclear, it is interpreted as a sign of trouble in a company's finances and acts as a factor that quickly chills investor sentiment.
The company said, "There is no liquidity pressure at all," adding, "This is merely fundraising for investment plans to be pursued going forward."
The poor performance of previously funded affiliates is also cited as a burden. Hyulim Robot has invested in 10 companies, including Hyulim AMC (equity stake 100%), Hyulim A-Tech (25.6%), and Hyulim KSD (100%). Of the 10, six are in the red, with a total loss of 29.5 billion won.
Reflecting these concerns, Hyulim Robot's share price closed at 10,970 won on the KOSDAQ on the previous day, down 840 won (7.11%) from the prior trading day.