20% of Total Shares Convertible in 4th CB
Currently Lower than Conversion Price... Stock Price Direction is Crucial
The conversion price of Hyunwoo Industry's 4th tranche convertible bonds (CB) has dropped to its lowest level. As the volume exceeding 20% of the total shares is likely to be converted into stocks, concerns about overhang are emerging.
According to the Financial Supervisory Service's electronic disclosure system on the 27th, Hyunwoo Industry announced that the conversion price of the 4th tranche CB was lowered from 3,967 won to 3,182 won the day before.
The 4th tranche CB was issued on September 22 last year at a scale of 12 billion won with a price of 4,545 won per share. The nominal and maturity interest rates are 0% and 1%, respectively. The conversion request period is from September 26 this year to August 26, 2027. The issuers include Suseong Asset Management, Hanyang Securities, and NH Investment & Securities. The raised funds were disclosed to be used for operating expenses such as purchasing raw materials and production goods, and paying labor costs.
Hyunwoo Industry, established in 1987, is a specialized company manufacturing and selling rigid printed circuit boards (PCBs) for TVs and automotive electronics. As of the third quarter of this year, the sales composition by product is 17.6% for home appliances such as TVs and LCDs, 77.3% for automotive electronics, and 3.2% for others including networks.
At the time of issuance, Hyunwoo Industry's stock price was moving in the mid-4,500 won range. However, the stock price fell below 4,000 won in June this year and dropped to the 2,000 won range last month, continuing to decline. The primary reason was poor performance. The cumulative sales on a consolidated basis for the third quarter of this year were 160.8 billion won, down 8.05% compared to the same period last year. Operating profit for the same period was 7.4 billion won, down 22.99%. Additionally, since Hyunwoo Industry's main business is in automotive electronics, concerns about the contraction of the finished car industry, including electric vehicles, are also reflected.
Due to the stock price decline, the conversion price has decreased, increasing concerns about potential sell-off volume (overhang). The conversion price of the 4th tranche CB was lowered to 3,967 won on April 26 this year and further adjusted to 3,182 won this time, reaching the lowest level. As a result, the volume that can be released to the market increased from 2,640,264 shares at the time of initial issuance to 3,771,213 shares. This represents an increase from 12.61% to 20.20% of the total issued shares. If the entire volume is converted into stocks at once, overhang concerns may arise.
In particular, the future direction of the stock price has become important. The closing price of Hyunwoo Industry on the previous day was 2,630 won, about 21% below the current conversion price. If the stock price fails to exceed the conversion price and moves to redemption, it could become a burden for the company. As of the third quarter of this year, Hyunwoo Industry's cash and cash equivalents amount to 12.7 billion won.
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