[Funding] Ecocap, Subscription Boom at Viamotors②

[Asia Economy Reporter Hyungsoo Park] Recently, as volatility in the domestic stock market has increased, it has become more difficult to raise funds by issuing new shares. There has been a growing number of cases where fundraising plans through initial public offerings (IPO) and paid-in capital increases have been disrupted due to low subscription rates. EcoCap, which is raising funds to expand its overseas subsidiaries, has seen a green light for fundraising as its stock price surged.

According to the Financial Supervisory Service on the 17th, EcoCap, which is pursuing a paid-in capital increase through a general public offering of forfeited shares after shareholder allocation, has set the first issuance price of new shares at 6,260 KRW. This is 12.6% lower than the 7,160 KRW expected at the time of the board resolution. The fundraising scale has decreased from 40 billion KRW to 35.1 billion KRW.

The final issuance price will be confirmed on the 26th. Subscription for existing shareholders will take place over two trading days from the 31st of this month to the 2nd of next month. EcoCap’s current stock price is above 9,000 KRW, more than 50% higher than the first issuance price. If the current stock price level is maintained until the subscription deadline, the subscription rate among existing shareholders is expected to be high.

EcoCap’s stock price showed a weak trend after the paid-in capital increase was decided on March 3. Even after the ex-rights date, the stock price declined, leading to a lower first issuance price. Although the fundraising scale decreased, the atmosphere remained uncertain regarding the success of subscription by existing shareholders. The weak trend in major overseas stock markets due to stagflation concerns also affected investor sentiment. The decline in stock prices of major electric vehicle companies in the U.S. stock market also acted as a negative factor.

EcoCap, which needs to expand its electric vehicle parts production facilities, is in a critical situation regarding fundraising. If fundraising is disrupted due to market influences, the company could fall behind in the rapidly changing electric vehicle parts ecosystem.

EcoCap announced on the 12th that it had been notified of the intention to issue a letter of intent (LOI) related to the supply of electronic cable assemblies with Bia Motors, expected to be issued within a few days. Bia Motors is headquartered in Orem, Utah, USA. Supported by its parent company, Ideanomics, it produces electric commercial vehicles such as cargo trucks, trucks, and buses. A company official explained, "We have had the opportunity to develop new customers for parts supply in the commercial electric vehicle sector in the Americas through the local factory in Mexico and to secure a market expansion advantage."

The expectation of the letter of intent influenced the stock price, which had fallen to around 6,000 KRW but surpassed the 9,000 KRW level within four days. The company stated that if a formal contract is signed after the LOI, annual sales could reach at least 50 million USD (total sales of 200 million USD) by 2026. EcoCap recorded sales of 85.4 billion KRW last year. Considering last year’s sales scale, the contract with Bia Motors could elevate annual sales to the next level.

EcoCap established a manufacturing plant in Mexico in 2018. It began operations in 2019 and sells through its U.S. subsidiary. As orders from first-tier parts suppliers for U.S. automakers increased through the U.S. subsidiary, the need to expand the Mexican subsidiary grew. EcoCap decided to utilize a bridge loan from Shinhan Investment Corp., the lead manager of the paid-in capital increase, to fund factory expansion and raw material purchases. It will first borrow 16 billion KRW to expand the factory and purchase key raw materials such as copper and compounds. Once funds are raised through the capital increase, the bridge loan will be repaid. Of the remaining funds after repayment, 4.96 billion KRW will be used to repay existing bank loans, and 8.78 billion KRW will be used for expanding the Mexican factory and production facilities.