[Funding] EMT, Major Shareholder Absence in Rights Offering①

[Asia Economy Reporter Hyungsoo Park] EMT, a KONEX-listed company, is planning a rights offering in which the largest shareholder will not participate. The funds raised will be used to purchase raw materials and repay borrowings.

According to the Financial Supervisory Service's electronic disclosure system on the 19th, EMT will issue 33,351,048 new shares by allocating 2.23 new shares per existing share. The issue price per new share is 1,738 KRW, and the total public offering size is 58 billion KRW.

In the rights offering, the largest shareholder Jaese Nungwon, who holds 61.15% (9,153,829 shares), will not participate in the subscription. After completing the capital increase, Jaese Nungwon's shareholding ratio will decrease to 32.78%. No additional investors will be recruited for the 20.39 million new shares allocated to Jaese Nungwon.

EMT's second largest shareholder and Jaese Nungwon's largest shareholder, Ningbo Ronabay New Energy Technology, will participate in the capital increase by investing 86 million CNY (16.3 billion KRW). Effectively, the second largest shareholder is contributing 70% of the funds EMT is raising. Although the second largest shareholder could invest through a third-party allotment, EMT chose the rights offering method.

The rights offering method is subject to relatively less regulation when determining the new share issue price. It is not subject to Article 5-18, Chapter 5 of the "Regulations on the Issuance and Disclosure of Securities," which applies to calculating the amount raised through market price issuance for listed companies.

In the case of third-party allotment or general allotment, if the new share issue price is too low, existing shareholders suffer losses. Since existing shareholders can decide whether to participate in the rights offering, they may avoid losses even if the discount rate compared to the market price is high.

The second largest shareholder, Ningbo Ronabay New Energy, will invest 16.3 billion KRW and receive 9.4 million new shares. As Jaese Nungwon does not participate in the capital increase, Ningbo Ronabay New Energy's shareholding ratio will rise by 20.59 percentage points from 28.19% to 48.78%.

EMT's stock price on the KONEX market is above 7,000 KRW. Considering the low average daily trading volume, it cannot be said that EMT's stock price properly reflects the corporate value. However, since there is a large gap between the market price and the new share issue price, it is more advantageous to participate in the capital increase than not to participate. Unlike third-party allotments, rights offerings do not have lock-up obligations.

EMT entrusted Samyoung Accounting Corporation with the valuation to determine the new share issue price. Samyoung Accounting Corporation calculated the net asset value at 26 billion KRW by subtracting net borrowings of 13.2 billion KRW from EMT's going concern value of 39.2 billion KRW. Dividing by the number of issued shares, 14.97 million shares, they calculated the value per share at 1,738 KRW.

원본보기 아이콘

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.