[Reporter’s Notebook] How Did Hanwha’s Stock Price Surge Happen?

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After the announcement of the spin-off, Hanwha Corporation's stock price soared for two consecutive days. On January 14, the day of the announcement, the stock surged by more than 25% compared to the previous trading day. It climbed a further 6% range on the following trading day. Although the price turned weaker on the morning of January 16 due to profit-taking, the stock, which started the new year in the 80,000 won range, touched the 130,000 won mark, drawing cheers from individual investors.

A spin-off in which shareholders receive shares of both the surviving and newly established companies is generally viewed as a positive catalyst in the stock market. However, the magnitude of the reaction this time was too strong to be explained solely by the effects of the spin-off. Even compared to the 15% surge in Hanwha Aerospace's share price when its spin-off plan was reported in April 2024, the response to Hanwha Corporation's announcement stood out as significantly higher.

The decision to split was not made overnight. Before the board of directors reached a resolution, Hanwha Corporation held several pre-briefings where hundreds of pages of materials were reviewed. Detailed analyses were conducted on the changes in financial structure resulting from the spin-off method, the business composition of both the surviving and new entities, and the impact of the division on stock price and shareholder value. Issues such as the expected impact on the stock price and the tangible changes for shareholders were discussed repeatedly.

The market responded not only to the restructuring itself, but also to the terms presented alongside it. As a result of this spin-off, businesses with relatively clear recent performance and order flows-such as defense, shipbuilding, and energy-will remain with the surviving entity. The discount factor that had arisen from multiple businesses being bundled under a single corporation is expected to diminish, while the intrinsic value of core businesses can be more intuitively reflected in the stock price.

The same applies to the newly established entity. Diverse businesses have now been organized under a unified framework. The management structure has been simplified, and a foundation has been laid for distinguishing and examining the performance of each business. The expanded range of strategic options for the future also influenced investment decisions. The fact that a more concrete post-split business landscape was presented has been noted by the market.

Simultaneously with the spin-off, Hanwha Corporation also announced a shareholder return policy that includes the cancellation of treasury shares. The shares to be cancelled are 4.45 million common shares (excluding those reserved for employee compensation via RSUs), accounting for about 5.9% of the total common shares. Based on market value, this equates to roughly 450 billion won. In addition, the company decided to increase the dividend per share by 25%, from 800 won to 1,000 won. This indicates that the company has considered the returns to shareholders alongside the restructuring.

The surge in Hanwha Corporation's stock price following the spin-off can be seen as the result of the combined effects of the restructuring, strengthened shareholder returns, and the mid- to long-term outlook for Hanwha's core businesses. The process has demonstrated that if the board's discussions go beyond formal approval procedures and include clear direction for restructuring and measures to enhance shareholder value, it is possible to win the trust of the market.

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