Hanwha Solutions (009830.KS), facing fierce shareholder backlash over its 2.4 trillion won ($1.7 billion) rights offering, has stirred controversy after its chief financial officer suggested the company had communicated with the Financial Supervisory Service (FSS) before announcing the capital raise. Although Hanwha Solutions quickly apologized and moved to contain the fallout, observers say reputational damage to the FSS — which must conduct an intensive review of the offering — is unavoidable.
According to industry sources on Sunday, Hanwha Solutions CFO Jeong Won-young told a retail investor briefing on Thursday that "we informed the FSS in advance about all our rights issue plans. We had been communicating even before submitting the securities registration statement." The remarks were interpreted as an attempt to reassure shareholders by indicating the company had prior coordination with financial authorities before announcing the massive rights offering on May 26.
The FSS immediately pushed back the same day. "Securities registration statement reviews are conducted strictly in accordance with legal procedures only after the statement is filed. There is absolutely no case of pre-coordinating or pre-approving the contents," the FSS said, adding that it had "immediately requested Hanwha Solutions to explain the circumstances, purpose, and factual basis of the remarks." The regulator drew a clear line against the suggestion of prior coordination.
As the controversy escalated, Hanwha Solutions issued a statement on Friday calling the remarks "an error in expression" and apologized to both shareholders and the FSS. "While explaining that we had verbally notified the FSS in advance of our intent to file a securities registration statement, the expression was poorly chosen, creating the misunderstanding that the rights issue plan had been discussed and cleared with the FSS beforehand," the company said. "This was an individual's mistake, not the company's official position." Hanwha Solutions added, "There was no prior consultation on the contents of the filing or the rights issue. We deeply apologize for delivering incorrect information to our shareholders."
Despite the explanation and apology, the aftershocks continue. The FSS, which is reportedly expected to complete its intensive review of the Hanwha Solutions rights offering within this week, is projected to face considerable pressure during the review process. Analysts say the regulator — which has maintained a stance of strict enforcement against excessive capital raises that damage shareholder value — risks credibility damage from the pre-coordination controversy.
Some retail investors opposing the rights issue are preparing collective action through Act, a minority shareholder solidarity platform. They initiated procedures to elect shareholder representatives on Friday and are collecting proxy signatures to demand an extraordinary general meeting. The meeting would reportedly seek to introduce cumulative voting, appoint directors representing minority shareholders, and propose extending the notice period for board meeting convocations.
Regarding Hanwha Solutions' explanation, Act said it "can never accept such a deceptive clarification," adding that "the person who made the remarks is not a mere working-level employee but the CFO who oversees the company's entire finances. As he attended the briefing representing the company, the company must bear heavy responsibility."