[Funding] Ewha Electric, Final Subscription Rate for Capital Increase at 82.4%

Stock Soars on News of Cooperation with Russian Company but Fails to Sell Out
20 Billion Won Invested in Battery Module and Pack Manufacturing Facilities with Raised Funds

[Asia Economy Reporter Hyungsoo Park] As Ihwa Electric is pursuing fundraising through a paid-in capital increase, it has been reported that the company will advance its secondary battery business in cooperation with Enertech International. With the stock price soaring, the gap between the new share issuance price and the market price widened, affecting general investors.

According to the Financial Supervisory Service's electronic disclosure system on the 5th, the subscription rate for Ihwa Electric's paid-in capital increase through a rights offering recorded a final subscription rate of 82.38%. Out of the planned 48 million shares to be issued, 39.54 million shares will be issued, raising 37.765 billion KRW. The remaining 8.46 million shares will not be issued.

Earlier, on April 20th, Ihwa Electric held a board meeting and resolved the agenda for the paid-in capital increase. The plan was to issue 48 million new shares at 909 KRW per share, raising 43.6 billion KRW. Following the announcement of the large-scale capital increase, the stock price fell continuously, and the planned issuance price for calculating the ex-rights price was lowered to 777 KRW.

Subsequently, the stock price began to rebound around the ex-rights date. From the 22nd to the 24th of last month, which served as the reference period for finalizing the new share issuance price, the stock price was higher than before the capital increase. Ultimately, the issuance price was set at 955 KRW, about 5% higher than the 909 KRW anticipated at the board meeting.

During the old shareholders' subscription, the stock price decline narrowed the price difference with the new share issuance price to 16.8%. Since 0.58 new shares were allocated per one old share, a large volume of sell orders could emerge on the new shares' listing day, potentially causing the stock price to fall. This explains why the old shareholders' subscription rate remained at 47.02%.

After the old shareholders' subscription ended and the general subscription began on the 4th, Ihwa Electric's stock price surged to the upper price limit. It is interpreted that the news of a meeting with the chairman of Enertech International's board, who visited Korea on the 27th of last month, to discuss specific business cooperation plans influenced the stock price.

Enertech's major shareholder is Rosatom, the Russian state-owned nuclear power company. Enertech supplies batteries to Russian electric cars and electric buses through its own factory. Previously, in June last year, Ihwa Electric signed a memorandum of understanding with Enertech to establish a joint battery pack factory. Enertech supplies battery cells to Ihwa Electric, which then builds manufacturing facilities for battery modules and packs to produce them collaboratively.

Battery cells are the basic units of lithium-ion batteries that store electrical energy for use. Battery packs are the final form of battery systems installed in electric vehicles. They are manufactured by equipping battery modules with various control and protection systems such as BMS (Battery Management System) and cooling systems.

Ihwa Electric plans to invest 20 billion KRW of the funds raised through the paid-in capital increase in establishing facilities for manufacturing battery modules and packs. Starting with manufacturing battery modules and packs for uninterruptible power supply (UPS) systems, its area of expertise, the company aims to expand applications through technology development to ESS and electric motorcycles.