Korea Zinc Choi Yun-beom’s sure-win card is ‘National Minjoo’… Shareholders ‘astonished’ by absurd card

Korea Zinc Choi Yun-beom’s sure-win card is ‘National Minjoo’… Shareholders ‘astonished’ by absurd card


Refer Report

Korea Zinc Chairman Choi Yoon-beom is speaking at a press conference held at the Grand Hyatt Hotel in Yongsan-gu, Seoul on the 2nd. Yonhap News

Choi Yun-beom, chairman of Korea Zinc, which is in the middle of a management rights dispute, this time took out the ‘national democracy’ card. The basic plan is to issue new shares of Korea Zinc worth 2.5 trillion won to the general public. The justification was to establish an open governance structure by significantly increasing the number of shareholders, but in reality, the purpose was to protect Chairman Choi’s personal management rights. However, with the announcement of this plan, the stock price plummeted to its lowest price, and existing shareholders, who suffered dilution of their shares, are seething.

Korea Zinc announced that it held an extraordinary board meeting on this day and decided on a paid-in capital increase through general public offering to issue 3,732,000 new shares. This means that large-scale new shares, amounting to 20% of the total number of issued shares, will be issued to the general public without first being allocated to existing shareholders.

Previously, the market had expected that the board of directors would discuss whether to hold an extraordinary general meeting of shareholders of Korea Zinc. This is because the Youngpoong and MBK Partners alliance, which is fighting with Chairman Choi, requested an extraordinary shareholders’ meeting on the 28th to change Korea Zinc’s board of directors. But the prediction was wrong.

Korea Zinc announced that it would raise a total of 2.5 trillion won by issuing 3.73 million new shares at 670,000 won per share, 30% lower than the recent stock price average. The actual stock issuance price and total issuance amount will be announced on the 29th of next month, reflecting future stock price trends. About 746,000 shares (about 500 billion won), or 20% of the total new shares, were allocated to the Employee Stock Ownership Association, which consists of Korea Zinc executives and employees.

Korea Zinc said, “The purpose of this capital increase is to strengthen the transparency of corporate management through dispersion of ownership by providing opportunities for shareholder participation to various investors, including minority shareholders, institutional investors, and the general public,” and added, “Based on the dispersion of ownership structure and expansion of the shareholder base, “With this, Korea Zinc will be able to establish itself as a national stock and resolve the risk of delisting and stock price instability due to reduced trading volume,” he said.

Contrary to this external justification, in reality, this capital increase plan appears to be largely aimed at defending Chairman Choi’s management rights. This is because Korea Zinc limited the subscription limit for paid-in capital increase participants to 3% (112,000 shares) of the total number of new shares. The Youngpoong-MBK joint venture is also subject to this upper limit, so a decline in shareholding ratio after the capital increase is inevitable. In the case of the subscription volume for the employee stock ownership association, we can side with Chairman Choi. Currently, Chairman Choi’s shareholding, including friendly shares, is 35.42%, which is lower than the Youngpoong-MBK joint venture (38.47%).

Korea Zinc’s existing shareholders are jumping. This is because this capital increase will result in large-scale dilution of shares and a decline in stock prices. In particular, Chairman Choi had previously promoted a tender offer against Korea Zinc’s treasury stock against the Youngpoong-MBK alliance and announced that he would cancel all treasury stocks purchased through the tender offer to ‘protect shareholder rights’. However, on this day, a plan was introduced to significantly increase the number of shares in circulation.

It is also controversial that Korea Zinc said it would use 2.3 trillion won (92%) of the 2.5 trillion won in funds raised through this capital increase to repay loans. Previously, Korea Zinc decided to take on up to 2.6 trillion won in debt for the purpose of a tender offer of treasury stock to defend Chairman Choi’s management rights. This means that most of the funds secured through this capital increase will be used to repay debt rather than new investments. Next.

On this day, Korea Zinc’s stock price on KOSPI (stock market) closed at 1,081,000 won per share, down 29.94% from the previous trading day. The news of a large-scale capital increase acted as bad news, and about 10 trillion won in market capitalization evaporated in one day. Korea Zinc’s stock price, which had fluctuated between 400,000 and 500,000 won per share before the management rights dispute, soared to an all-time high of 1,543,000 won per share the previous day in the aftermath of the stock competition.

The Youngpoong-MBK alliance said on this day, “Korea Zinc’s decision to increase paid-in capital is an act that violates existing shareholders and market order,” and added, “We will seek all legal means to block the decision to increase capital.” On this day, Korea Zinc submitted a securities report for paid-in capital increase to the Financial Supervisory Service. The scheduled public offering subscription date is December 3-4, but this may change depending on the Financial Supervisory Service review process and court proceedings.

Reporter Jong-oh Park pjo2@hani.co.kr, Reporter Ji-won Noh zone@hani.co.kr

Source: Korean