South Korea’s Financial Supervisory Service (FSS) has mandated that Hanwha Solutions revise its substantial 2.4 trillion won ($1.62 billion) rights offering plan, citing critical deficiencies in its regulatory disclosures.
The FSS stated that “certain material information” was either absent or ambiguously presented, impeding the capacity of prospective investors to make informed investment decisions. Hanwha Solutions has been granted a three-month period to submit a thoroughly revised statement.
On March 26, Hanwha Solutions initially declared its intention to issue 72 million new shares, aiming to secure 2.4 trillion won. The company outlined its strategy to allocate approximately 1.5 trillion won towards the repayment of short-term borrowings and corporate bonds, with the remaining 900 billion won designated for strategic investments, notably within its expanding solar energy division.
This ambitious capital increase proposal, particularly its allocation for debt repayment amidst a period of weak financial performance, drew significant criticism and backlash from shareholders. Hanwha Solutions reported a substantial operating loss of approximately 365 billion won last year, primarily impacted by a challenging downturn across its key solar and petrochemicals sectors.
Following the announcement, Hanwha Solutions’ shares experienced a sharp decline, plummeting approximately 20 percent across two trading sessions. By late morning on Friday, the stock was trading at 40,500 won, a significant drop from its 52-week high of 59,300 won recorded in February.
The controversy further escalated when CFO Jung Won-young stated during an April 3 meeting with retail investors that prior communication with the FSS had occurred regarding the plan’s filing – an assertion promptly refuted by the regulator itself.
In response, Hanwha Solutions affirmed its commitment to fully comply with the FSS’s revision request, emphasizing its intention to prioritize and enhance shareholder value within its forthcoming updated filing.
This regulatory intervention underscores a broader trend of heightened scrutiny by authorities concerning large-scale capital increases undertaken by various Hanwha Group affiliates. Notably, Hanwha Aerospace faced a similar directive last year, being ordered to revise its capital raising plan due to disclosure issues before ultimately recalibrating its deal size.
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