Securing Leadership During Demand Recovery and Easing Borrowing Burden
Some Raise Concerns Over Shareholder Value Dilution
As the chasm (temporary demand stagnation) for electric vehicles lengthens, Samsung SDI, whose financial situation has deteriorated, is planning a paid-in capital increase worth 2 trillion won. This is interpreted as a plan to actively execute investments to secure leadership during the demand recovery period while simultaneously reducing the burden of rapidly increasing borrowings.
Samsung SDI announced on the 14th that it held a board meeting and resolved to raise funds through a paid-in capital increase for facility investment. The number of shares for this paid-in capital increase, conducted through a rights offering followed by a general public offering of forfeited shares, is 11,821,000 shares, with a capital increase ratio of 16.8%.
Samsung SDI plans to use the funds raised through this paid-in capital increase for facility investments and other purposes. In particular, to secure mid- to long-term growth engines, the company will actively promote not only already confirmed investments such as joint ventures (JV) with Stellantis and GM in the United States but also facility investments at its plant in Hungary, Europe, and new technology development and mass production investments for solid-state and lithium iron phosphate (LFP) batteries. The company explained that this decision was made considering the mid- to long-term growth prospects of the electric vehicle battery market and the characteristics of the battery business, which requires 2 to 3 years from facility investment to mass production.
The scale of Samsung SDI's facility investments has increased nearly fourfold, from around 1.7 trillion won in 2019 to about 6.6 trillion won in 2024. Although the scale of facility investments is expected to slightly decrease this year due to temporary demand contraction and investment efficiency improvements compared to the previous year, the company plans to continue investing to secure future technology leadership and production capacity.
This paid-in capital increase is also interpreted as a proactive measure to stabilize the financial structure. Net borrowings, calculated by subtracting cash and cash equivalents from total borrowings, surged 163.3% to 9.5928 trillion won at the end of last year compared to 3.6432 trillion won the previous year. Choi Ju-seon, CEO of Samsung SDI, stated, "We decided on the paid-in capital increase to accelerate mid- to long-term growth based on a stable financial structure," adding, "We will overcome the chasm through strengthening technological competitiveness, expanding sales and orders, and cost innovation, and steadily prepare for the upcoming super cycle."
Choi Juseon, CEO of Samsung SDI, is answering questions from the press at 'InterBattery 2025' held at COEX, Samseong-dong, Gangnam-gu, Seoul on the morning of the 5th. (Photo by InterBattery 2025 Joint Press Corps)
However, some express concerns from the perspective of governance and shareholder value. An industry insider said, "Samsung SDI's debt ratio (88.24%) is relatively low in the industry, and its financial soundness is also good," adding, "It is somewhat puzzling that the company chose a paid-in capital increase, which dilutes shareholder value, instead of issuing corporate bonds." As of the end of last year, LG Energy Solution's debt ratio was 94.7%, and SK On's was about 170.8% as of the end of September.
Samsung SDI is reportedly considering utilizing its stake in Samsung Display to raise funds besides the paid-in capital increase. Samsung SDI holds a 15.2% stake in Samsung Display, valued at approximately 9 trillion won.
Meanwhile, the allocation of new Samsung SDI shares will be based on the record date of next month’s 18th, with the final issue price determined on May 22. After subscription processes in the order of employee stock ownership association, existing shareholders, and general public offering from May 27 to June 3, the listing of new shares is scheduled to be completed on June 19.
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