[Reporter Reading Securities Report] Unison, Continued Losses Trigger Red Flag on Financial Soundness

Unison, a wind power company that has recorded net losses for several years and faced red flags in financial soundness, has launched a paid-in capital increase worth 38 billion KRW. The move appears aimed at strengthening financial stability through capital expansion. The funds raised will be used to purchase raw materials used in offshore wind power.

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According to the financial investment industry on the 27th, Unison decided to proceed with a paid-in capital increase through a rights offering followed by a general public offering of forfeited shares. They plan to issue a total of 42 million shares to raise 38.1 billion KRW. The planned issue price is 908 KRW per share.

Unison has continued to record net losses from 2020 through last year. Last year, sales amounted to 107.7 billion KRW, down 54.9% from the previous year. Operating loss was 19.6 billion KRW, turning to a deficit compared to the previous year. Net loss also continued, resulting in a deficit of 26.2 billion KRW.

As a result, Unison’s financial indicators deteriorated. As of the third quarter of last year, the debt ratio stood at 359.4%, up 69.6 percentage points from 289.8% at the end of 2022. The total equity was 63.6 billion KRW, with a difference of only 484 million KRW from the capital stock. Especially, since an additional net loss of 11.1 billion KRW was recorded in the fourth quarter of last year, there is a possibility that the company has fallen into capital erosion.

If the paid-in capital increase is successfully carried out, it is expected that concerns about capital erosion can be alleviated. However, dilution of shareholder value appears unavoidable. Currently, Unison has a total of 126,337,856 shares. The newly issued shares will be 42 million, accounting for 33.24% of the total.

Dilution of the largest shareholder’s stake is also inevitable. The largest shareholder, Anemoi, has decided not to participate in this capital increase. This will reduce the largest shareholder’s stake from 12.28% to 9.21%. Even if Anemoi exercises all convertible bonds (CB) and bonds with warrants (BW) it holds, the stake will only reach 17.33%.

Unison explained in its securities registration statement, "Considering the low stake of the largest shareholder, the possibility of a change in the largest shareholder and management risk cannot be excluded," adding, "In the long term, there is a possibility that the largest shareholder’s stake will be further diluted due to additional capital increases, issuance, and conversion (exercise) of stock-related bonds, and continuous monitoring is necessary."

Meanwhile, Unison plans to use all funds raised through the capital increase as operating funds. Specifically, the funds will be used for purchasing raw materials including blades used in wind turbines, transportation costs, and business development expenses for offshore wind power complexes.

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