[At a Crossroads] Kumyang① Chairman Ryu Gwangji Secures 77 Billion Won in Cash through Rights Offering

Chairman Ryu Gwangji Practically Not Participating in Paid-in Capital Increase
7.3 Trillion Won More Needed... Repaying Chairman Ryu's Money First

Ryu Gwang-ji, Chairman of Geumyang. [Photo by Yonhap News]

KOSPI-listed company Geumyang is pushing for a 450 billion KRW rights offering, and Chairman Ryu Gwang-ji of Geumyang is expected to pocket 77 billion KRW in cash once the capital increase is completed. This is because he plans to recover the money he lent to the company as the capital increase funds without actually injecting cash into the rights offering.

According to the Financial Supervisory Service's electronic disclosure system on the 8th, Geumyang decided on a 450.2 billion KRW rights offering through a shareholder allocation followed by a general public offering of unsubscribed shares on the 27th of last month. The planned issue price is 38,950 KRW, and approximately 0.2 new shares will be allocated per existing share held.

The purpose of the fund-raising is 350.2 billion KRW for facility funds and 100 billion KRW for debt repayment. Geumyang, a company producing and selling blowing agents, has been pursuing a new secondary battery business since 2022. To this end, it is building a production facility worth 1.3 trillion KRW in Gijang, Busan. So far, 576.7 billion KRW has been invested, and about 730 billion KRW in additional investment costs is needed. Geumyang stated that it is conducting the rights offering to raise these funds.

Part of the capital increase proceeds will be used to repay loans to Chairman Ryu Gwang-ji and his special affiliates, KJ International and KY Eco. Chairman Ryu and these special affiliates have lent 524.7 billion KRW to Geumyang. Geumyang stated that it will repay 77 billion KRW of this amount once the capital increase funds are received.

In particular, since Chairman Ryu is not actually injecting cash into this shareholder-allocated rights offering, he is expected to fully pocket the 77 billion KRW.

Currently, Chairman Ryu holds 20,676,103 shares (35.62%) of Geumyang. Among the 11.56 million new shares to be issued through this rights offering, Chairman Ryu is allocated 4,117,409 shares, worth approximately 160.4 billion KRW at the planned issue price.

Additionally, Chairman Ryu announced that he will dispose of his existing shares through an off-hours block trade. The planned sale quantity is 4,574,899 shares, which will be sold at a 10% discount to the rights offering issue price. This means selling at 35,055 KRW per share based on the planned issue price. This results in a total sale amount of 160.4 billion KRW, which is the same as the subscription price for the shares allocated to Chairman Ryu.

In effect, he is selling his existing shares to subscribe to the new shares. Moreover, Chairman Ryu also stated that the block trade sale quantity may increase or decrease depending on future stock price fluctuations. If the rights offering issue price is finalized, the sale quantity will be adjusted accordingly, meaning he will not use any cash to acquire the allocated shares.

If the block trade and capital increase proceed as planned, Chairman Ryu's shareholding ratio will decrease. His expected number of shares after the capital increase is 20,218,613 shares (29.05%), which is 6.57 percentage points lower than his current stake. Although it was disclosed that he would subscribe 100% to the allocated new shares, there will be no cash injection, and his shareholding ratio will actually decrease.

Meanwhile, when asked why the company is repaying Chairman Ryu’s loans first at a time when additional investment funds are needed, the company did not respond.