UTI, which is pushing to supply ultra-thin glass (UTG) for foldable phones to Apple, has moved onto mass-production trials in July. Having repeatedly issued convertible bonds (CBs) to build a production base in Vietnam with the goal of supplying a North American client, this mass production is expected to be the first stage to confirm the results of more than two years of investment.
However, with mass production just ahead, CB investors who funded the plant construction are exercising put options one after another to recover their investments. The market sees the outcome of this mass production as a watershed that will determine business performance and financial conditions.
According to the Financial Supervisory Service's electronic disclosure system on the 30th, UTI disclosed that it acquired 700 million won of its second CB before maturity. This followed the bondholder's exercise of a put option. A put option is a right that allows an investor to demand principal repayment from the company before maturity.
Since the second quarter of this year, institutional investors have been exercising put options in succession. On the 1st CB last month, put options of 7 billion won, 10 billion won, and 6.9 billion won were exercised, respectively. Tiger Asset Management Discretionary Investment, Focus Asset Management, and YC Asset Management participated in the first and second CBs.
CB investors' successive exercises of put options are seen as stemming from the share price falling below the conversion price, removing the incentive to convert to stock. After the refixing in Mar., the adjusted conversion prices of the first and second CBs were 25,592 won and 21,458 won, respectively. In contrast, UTI's share price was 22,100 won on May 22, the date a put option was exercised; 21,850 won on May 29; 19,020 won on Jun. 1; and 4,720 won on Jun. 29, all below the conversion prices.
The share price had been weak as the mass-production schedule expected in the first half of this year was delayed, and it fell further as CB investors exercised large put options.
Earlier, UTI moved to raise large funds to mass-produce ultra-thin glass (UTG) for foldable smartphones for a North American client in 2024. Through a paid-in capital increase, CBs, and exchangeable bonds (EB), it secured a total of 158.5 billion won, of which 116.2 billion won was invested in building the production plant and mass-production lines in Vinh Phuc Province, Vietnam. The remaining 42.3 billion won was used as operating funds.
But with no tangible mass-production results yet confirmed and CB redemptions continuing, shareholders' anxiety is growing. Typically, if the share price exceeds the conversion price, CB investors convert to stock and realize gains, but recently institutional investors have been exercising put options one after another to recover their funds. The market interprets this as a sign that expectations for a share-price rise have diminished accordingly.
The financial burden from CB redemption is also growing. In the first quarter of this year, UTI posted 4.7 billion won in revenue and a 13.2 billion won operating loss. The cumulative operating loss over the past three years amounts to 100 billion won. As of the end of the first quarter, liabilities were 174.1 billion won and equity was 56.4 billion won, for a debt ratio of about 300%. In a situation of a weak financial structure, continued fund recovery by creditors raises concerns that short-term liquidity pressure may increase ahead of mass production.
With liquidity concerns arising ahead of mass production, UTI moved to reassure shareholders. UTI said, "In relation to the North American client business, we are discussing mid- to long-term funding with a strategic investor (SI) to expand production capacity (CAPA) by 20 million units by 2027," adding, "We are also reviewing liquidity measures using self-owned assets."
Specifically, it plans to secure short-term working capital by using assets that can be monetized, including selling part of the land of its Vinh Phuc entity in Vietnam and its Yesan Plant 1, taking out a headquarters collateral loan, borrowing from local financial institutions in Vietnam, and disposing of memberships.
Market attention ultimately focuses on whether the July mass-production schedule proceeds as planned. According to the schedule the company disclosed, in mid-July it will secure a six-month production forecast and three months of purchase orders (PO) from the North American client, complete production validation testing (PVT) and a stress run on the 21st, and begin mass production (MP) on the 27th. PVT is the final stage of verifying production yield and quality on the actual mass-production line, and only after passing it can full-scale mass production and deliveries proceed.
Previously, brokerages projected that if UTI succeeds in mass production, it could secure a high market share. Hyundai Motor Securities estimated in a report last Nov. that the North American client's 2026 foldable phone volume would be about 10 million units, with UTG demand of 13 million to 15 million sheets. It analyzed that if UTI completes the expansion of Vietnam Plants 1 and 2, it could secure at least a 50% market share (M/S) based on its production capacity (CAPA) and technology.
ChosunBiz made multiple attempts to contact UTI for comment, but was unable to reach the company.