Following Hanwha Aerospace and Hanwha Solutions, EcoPro BM has become the latest company to face delays in its large-scale capital increase due to requests for corrections from the Financial Supervisory Service (FSS). As the schedules for capital increases are postponed, shareholder dissatisfaction is growing.
According to industry sources on July 16, the FSS has repeatedly requested companies to amend their securities registration statements, causing delays in their fundraising schedules. Amid rising concerns over shareholder value dilution, the FSS's scrutiny has intensified, leading to what some are calling a 'capital increase nightmare.'
On July 15, the FSS demanded that EcoPro BM submit a corrected registration statement for its capital increase. As a result, the original registration statement has been rendered ineffective until the corrections are submitted.
The FSS determined that the registration statement lacked proper formatting or omitted important information, which could hinder investors' rational judgment. However, the specific details of the required corrections have not been disclosed.
Reducing the size of the capital increase appears challenging for EcoPro BM. According to the securities registration statement submitted last month, the company has financial debts maturing within a year amounting to 2.1855 trillion won. In contrast, its cash and cash-equivalents available for immediate use total only 341.7 billion won, which is just one-sixth of its short-term financial liabilities.
While the company has receivables of approximately 334.2 billion won from customers, the time required to convert these into cash has increased from 21.2 days last year to 36.6 days in the first quarter of this year. This delay is attributed to rising costs associated with raw material purchases and inventory as factory operations recover.
It is important to note that EcoPro BM does not need to repay the entire 2.1855 trillion won immediately. The company plans to refinance a significant portion of its financial debt through existing financial institutions and is negotiating maturity extensions with some investors. However, with insufficient cash reserves and additional investments planned, such as in an Indonesian nickel smelter, analysts suggest that the company has limited capacity to significantly reduce the initially proposed capital increase size.
Previously, Hanwha Group affiliates that attempted large capital increases also faced challenges from the FSS. Hanwha Aerospace received two correction requests on March 27 and April 17 of last year. During this process, it reduced its capital increase size from 3.6 trillion won to 2.3 trillion won and subsequently passed the FSS review, completing its subscription and new stock listing. The listing date for the new shares was postponed from June 24 to July 21.
Hanwha Solutions also overcame the FSS's scrutiny after three attempts. After receiving correction requests on April 9 and 30, the third amended registration statement gained effectiveness last month. The size of its capital increase was reduced from an initial 2.4 trillion won to approximately 1.7 trillion won.
Due to the repeated correction process, the schedule has been delayed by about a month. The new stock listing, originally set for July 10, has been pushed back to August 11. The company has now passed the FSS review, and after determining the final issuance price on July 16, it plans to conduct subscription for existing shareholders on July 22-23 and a public offering on July 27-28.
EcoPro BM is expected to submit a revised securities registration statement to enhance shareholder understanding without withdrawing its capital increase plan. Given that it must undergo FSS review again with the new submission, the originally scheduled listing date of November 5 is likely to be delayed. Market observers are keenly watching whether EcoPro BM can complete the process without reducing the capital increase size, unlike the Hanwha Group affiliates that faced repeated correction requests.
* This article has been translated by AI.
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