Hwain Circuit 6th Series CB Dropped to Minimum Conversion Price

Stock Price Drops to Conversion Price Floor
Approximately 9.41% of Total Shares... Concerns Overhang

The conversion price of Fine Circuit's 6th series convertible bonds (CB) has dropped to its lowest level. As the CB conversion price decreases, the amount that can be issued exceeds 9% of the total shares, raising concerns about overhang (potential large-scale sell-off volume).

According to the financial investment industry on the 6th, Fine Circuit recently announced that the conversion price of the 6th series CB was adjusted from 10,108 KRW to 9,424 KRW. The reason for the adjustment is due to a decline in the stock price. This is also the lowest adjusted price.

Fine Circuit issued 10.5 billion KRW worth of 6th series CB in March last year. The initial conversion price was 13,462 KRW, with a nominal interest rate of 0.0% and a maturity interest rate of 2.0%. Fine Circuit decided to use gold for advance purchase of raw materials. The plan was to invest 5 billion KRW last year, 3 billion KRW this year, and 2.5 billion KRW annually from next year. The company explained in the announcement at the time, "We intend to hedge the risk of price fluctuations by securing and holding raw materials in advance."

The reason for the adjustment of the conversion price is the decline in the stock price. Fine Circuit's stock price, which was 19,750 KRW on March 30 last year, dropped to 7,170 KRW on October 23 of the same year. It rose to 9,700 KRW on the 23rd of last month but fell to 8,390 KRW on the day of the announcement. This represents a 57.52% decrease compared to March 30 last year and is below the lowest adjusted conversion price.

Due to the stock price decline, the number of shares that can be issued has increased. The current volume convertible into shares is 1,114,176 shares. This is a 42.85% increase compared to the 779,973 shares convertible at the time of the initial CB issuance. As the convertible volume increases, concerns about overhang have also grown. This volume corresponds to 9.41% of Fine Circuit's total shares of 11,840,684, which could be released into the market.

Since the conversion price is below the minimum conversion price, investors holding the CB may demand redemption. However, as of the third quarter of last year, Fine Circuit's cash and cash equivalents amounted to 35.56332 billion KRW, so it is expected that there will be no significant burden. Of course, since the conversion request period is from the 30th of next month to February 29, 2028, the situation may change at any time depending on future stock price conditions and company circumstances.

Fine Circuit, established in 1991, is a specialized manufacturer of rigid printed circuit boards (PCBs). It manufactures and sells components for home appliances, electric vehicle chargers, and charging equipment. The company has developed single-sided, double-sided, and multilayer rigid PCBs. It entered the KOSDAQ market through a merger with Shinyoung SPAC No.6 on November 3, 2022. As of the third quarter of last year, cumulative sales and operating profit were 51.79199 billion KRW and 3.22736 billion KRW, respectively, representing decreases of 1.58% and 38.02% compared to the same period the previous year.