Financial Authorities Halt Hanwha Aerospace′s $2.7 Billion Rights Offering, Citing Insufficient Justification

Financial Authorities Halt Hanwha Aerospace's $2.7 Billion Rights Offering, Citing Insufficient Justification: Kim Jisun / Published : 03/28/2025 03:57 AM

Photo = Hanwha Aerospace

[Alpha Biz= Kim Jisun] Just a week after Hanwha Aerospace announced its record-breaking 3.6 trillion KRW ($2.7 billion) rights offering, South Korea’s financial regulators have intervened, demanding the company strengthen its justification and improve shareholder communication.

On Thursday, the Financial Supervisory Service (FSS) requested Hanwha Aerospace to submit a revised securities registration statement, citing deficiencies in key areas such as the necessity of the rights offering, shareholder communication procedures, and the clarity of fund utilization.

Hanwha Aerospace, which decided on the massive shareholder-allocated rights issue on March 20, had its filing promptly placed under intensive review by the FSS. The agency stated, “Following a thorough examination, we determined that the disclosure lacked sufficient information for investors to make an informed decision.”

While the specific details of the revision request were not disclosed, the FSS emphasized that it would closely review the company’s amended filing upon submission.

The rights offering has been met with criticism regarding the allocation of funds. Hanwha Aerospace stated that the proceeds would be used for acquiring securities in other companies (2.4 trillion KRW) and securing facility investments (1.2 trillion KRW). However, concerns have arisen over the long-term nature of these projects, with fund deployment extending as far as 2029 or 2030, raising uncertainties about the necessity of the offering.

Additionally, critics question whether Hanwha Aerospace needed to dilute shareholder value through a capital increase, given its stable cash flow. Scrutiny has also intensified over the company's recent internal transactions. Just days before the rights issue announcement, Hanwha Aerospace spent 1.3 trillion KRW acquiring a 7.3% stake in Hanwha Ocean from Hanwha Impact and Hanwha Energy, raising concerns that the company turned to shareholders for funding immediately after an internal cash outlay.

Following the rights offering announcement, Hanwha Aerospace's stock has dropped 12.3%, from 756,000 KRW to 663,000 KRW.