South Korea’s financial watchdog, the Financial Supervisory Service (FSS), has urged Hanwha Aerospace to provide more detailed information on its 3.6 trillion won ($2.46 billion) equity raising plan, specifically regarding its connection to the company’s restructuring efforts.
The FSS halted the defense company’s capital raising proposal last week, citing a lack of critical information that shareholders need to make informed decisions. The company was instructed to submit an updated filing that includes the missing details.
FSS Senior Deputy Governor Hahm Yong-il emphasized the need for clarity, stating that the ownership restructuring of Hanwha Aerospace’s affiliates and its relationship with the share issuance plan must be clearly explained. He also stressed the importance of noting the impact of the restructuring on the company.
The controversy surrounding the plan led to a sharp decline in Hanwha Aerospace’s stock on March 21, the day after the announcement. Shares fell by 13%, the largest drop since November 2016, as analysts raised concerns about the necessity and intentions behind the capital raise.
In a related development, Hanwha Group, South Korea’s seventh-largest conglomerate, revealed that its Chairman, Kim Seung Youn, transferred an 11.32% stake in Hanwha Aerospace’s parent company, Hanwha Corp, to his sons as part of a succession plan.
To demonstrate their commitment to increasing shareholder value, executives from Hanwha Aerospace, including one of Kim’s sons, purchased about 9 billion won worth of shares.
This latest controversy over Hanwha’s share issuance is part of a wider trend of large capital-raising plans by South Korean companies, including Samsung SDI and Korea Zinc, which have faced investor backlash amid ongoing corporate governance reforms.
Following the news, Hanwha Aerospace’s shares rose by 7.5%, while the KOSPI index gained 1.8% as of 0445 GMT.
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