[Featured Stock] Daewoo Shipbuilding & Marine Engineering Drops 14% in One Day Amid Capital Increase Concerns... Hanwha Group Stocks Also Weak

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Daewoo Shipbuilding & Marine Engineering (DSME), which is set to have Hanwha Group as its new owner, turned to a sharp decline just one day after the announcement.

As of 10:13 AM on the 27th, DSME is trading at 21,250 KRW, down 14.83% compared to the previous trading day.

The stock had surged up to 26,000 KRW, a rise of 18.18%, the day before, but profit-taking selling emerged, and concerns over the large scale of the rights offering potentially disadvantaging existing shareholders have led to additional selling pressure.

Yoo Jae-sun, a researcher at Hana Securities, explained, "The scale of the rights offering is substantial, raising concerns about dilution of existing shareholders' value. Even after the rights offering is completed, the Korea Development Bank still holds a 28.2% stake in DSME, which means there is a continuous risk of overhang (potential selling pressure) related to the recovery of public funds."

The Hanwha Group stocks, the acquiring party, also showed a series of declines. Industry insiders point out that there is significant uncertainty regarding the normalization of DSME's financial structure and improvement in its performance.

Hanwha (-0.19%), Hanwha Aerospace (-2.27%), and Hanwha Systems (-2.44%) are all in a downtrend. These stocks had also fallen by about 5-10% the previous day.

The Korea Development Bank announced the day before that DSME had signed a conditional investment agreement (MOU) with Hanwha Group, including a 2 trillion KRW rights offering plan.

Hanwha Group will conduct a 2 trillion KRW rights offering to secure a 49.3% controlling stake in DSME. Hanwha Aerospace (1 trillion KRW), Hanwha Systems (500 billion KRW), Hanwha Impact Partners (400 billion KRW), and three subsidiaries of Hanwha Energy (100 billion KRW) will participate in the rights offering.