UTI, which is pushing to supply ultra-thin glass (UTG) for Apple's foldable phones, has gone on the mass-production trial block in July. Having successively issued convertible bonds (CBs) to build a production base in Vietnam with the goal of supplying a North American client, this mass-production run is expected to be the first stage to confirm the results of more than two years of investment.
But with mass production just ahead, CB investors who funded the plant construction are exercising put options one after another to recoup their money. The market expects the outcome of this mass-production run to be 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 repayment of principal from the company before maturity.
Institutional investors have been exercising put options throughout the second quarter of this year. On the 1st CB last month, put options were exercised in amounts of 7 billion won, 10 billion won, and 6.9 billion won, respectively. Tiger Asset Management Discretionary Investment, Focus Asset Management, and YC Asset Management participated in the first and second CBs.
CB investors are believed to have exercised put options in succession because the share price fell below the conversion price, eliminating the incentive to convert to stock. After the refixing in March, the adjusted conversion prices for the first and second CBs were 25,592 won and 21,458 won, respectively. In contrast, UTI's share price on the put option exercise dates was 22,100 won on May 22, 21,850 won on May 29, 19,020 won on June 1, and 4,720 won on June 29, all below the conversion prices.
The stock had been weak as the mass-production schedule, expected in the first half of this year, was delayed, and it fell further when CB investors exercised large put options.
Previously, 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 rights issue and the issuance of CBs and exchangeable bonds (EBs), it secured a total of 158.5 billion won, of which 116.2 billion won was invested in the production plant and mass-production lines in Vinh Phuc Province, Vietnam. The remaining 42.3 billion won was used as operating funds.
However, with no tangible mass-production results yet confirmed and CB redemptions continuing, shareholders' anxiety is growing. Typically, when the share price is above the conversion price, CB investors convert to stock to realize gains, but recently institutional investors have been exercising put options in succession 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 redemptions is also growing. UTI posted 4.7 billion won in sales and an operating loss of 13.2 billion won in the first quarter of this year. 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, putting the debt-to-equity ratio at about 300%. With a fragile financial structure and creditors moving to recover funds, concerns are rising that short-term liquidity pressure could increase ahead of mass production.
With liquidity concerns surfacing ahead of mass production, UTI moved to calm shareholders. UTI said, "Regarding the North American client business, we are in discussions with a strategic investor (SI) for mid- to long-term financing to expand production capacity (CAPA) by 20 million units in 2027," adding, "We are also reviewing ways to secure liquidity by utilizing our own assets."
Specifically, the plan is to secure short-term working capital by using assets that can be monetized, such as part of the land held by the Vinh Phuc entity in Vietnam, the sale of the Yesan Plant 1, a headquarters collateral loan, borrowings from local financial institutions in Vietnam, and membership rights.
Market attention ultimately centers on whether the July mass-production schedule proceeds as planned. According to the schedule disclosed by the company, in mid-July it plans to secure a six-month production plan (forecast) and three months of purchase orders (POs) 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 upon 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. In a report last November, Hyundai Motor Securities estimated the North American client's 2026 foldable phone volume at about 10 million units and UTG demand at 13 million to 15 million sheets. It analyzed that if UTI completes the expansion of its Vietnam plants 1 and 2, it could secure at least a 50% market share (M/S) based on production capacity (CAPA) and technology.
ChosunBiz made multiple attempts to reach UTI for comment, but was unable to make contact.