[Market Focus] Taekwang Industrial Drops on Decision to Issue Exchangeable Bonds Based on Treasury Shares

As of 9:40 a.m. on June 30, in the Korea Exchange, shares of Taekwang Industrial were trading at 989,000 won, down 10.34% from the previous session's closing price. This appears to be due to the company's announcement that it will issue exchangeable bonds (EB) based on all of its treasury shares.

On June 27, Taekwang Industrial held a board meeting and resolved to issue exchangeable bonds worth 318.6 billion won, using all of its treasury shares (271,769 shares) as the underlying asset. The exchange request period will begin on November 5 and end on July 8, 2028. Taekwang Industrial stated that it plans to raise funds for new business initiatives through the issuance of these exchangeable bonds.

Previously, investors in Taekwang Industrial had hoped that the company would retire a portion of its treasury shares, which account for as much as 24.41% of the total outstanding shares, in order to boost the stock price. This is because retiring treasury shares reduces the number of outstanding shares, thereby increasing the value per share.

Trusston Asset Management, the second-largest shareholder of Taekwang Industrial, stated on June 29, "This decision is not a reasonable managerial judgment, but rather a trick and an illegal act intended to evade the government's recent push to amend the Commercial Act (such as mandatory retirement of treasury shares) and shareholder protection policies." The company also added, "Issuing EBs with treasury shares as the underlying asset has the same effect as a third-party paid-in capital increase when the exchange rights are exercised, which severely infringes on the interests of existing shareholders. We will file for an injunction and hold the directors who made this decision civilly and criminally liable."