Financial regulators have put the brakes on Hanwha Solutions' (009830.KS) rights offering worth 2.4 trillion won ($1.7 billion). The company must either revise its capital increase plan and refile the securities registration statement within three months or withdraw the offering entirely.
According to the Financial Supervisory Service's electronic disclosure system on Wednesday, the FSS demanded an amended registration statement for the rights offering that Hanwha Solutions submitted on December 26. "We demanded submission of an amended registration statement on January 9 pursuant to Article 122 of the Financial Investment Services and Capital Markets Act," the FSS said. "The securities registration statement is deemed not accepted from the date of this demand, and its effectiveness is suspended." Hanwha Solutions must now submit an amended filing within three months.
Demands for amended registration statements are issued when securities filings fail to meet proper format requirements, contain false statements about material matters, omit material information, or include unclear descriptions that may impede investment decisions or cause misunderstanding.
Hanwha Solutions announced on December 26 that it had decided to proceed with a rights offering issuing 72 million new common shares. The total capital to be raised amounts to 2.3976 trillion won. The company said it would use the proceeds for debt repayment and future growth investments.
However, shareholder backlash followed the plan to repay debt stemming from poor business performance through a rights offering. The stock price plunged approximately 20% within two days of the announcement. Vice Chairman Kim Dong-kwan and other executives announced they would purchase 4.2 billion won worth of company shares, but this was deemed insufficient to quell the opposition. Criticism spread across the entire group as the case of affiliate Hanwha Aerospace, which conducted a rights offering last year, was brought up for comparison.
Hanwha Solutions held a general shareholder meeting on January 3 to address concerns, but controversy intensified when CFO Chung Won-young stated that "we had been communicating with the FSS about the rights offering plan even before submission." The FSS demanded an explanation, saying "there was no prior consultation or approval," and CFO Chung was placed on standby duty.
"We take the FSS's demand for amendment very seriously and will respond as thoroughly as possible," a Hanwha Solutions official said. "We will prepare a registration statement that fully complies with the amendment requirements, with enhancing shareholder value as our top priority."