Common Shareholders Oppose Hanwha 1U Conversion Demands, Citing "Fairness Issues"

"Equity Dilution Could Harm Existing Common Shareholders"

Regarding the demand by some shareholders to convert Hanwha 1st Preferred Shares (Hanwha 1U) into common shares amid the delisting process, Hanwha has stated that "existing common shareholders could be adversely affected due to equity dilution."

On July 9, a Hanwha representative explained, "There is no provision in the articles of incorporation for the conversion to common shares as requested by the Hanwha 1U Minority Shareholders' Alliance, and such a conversion could result in equity dilution that would harm existing common shareholders." The representative added, "It is also difficult to proceed due to fairness issues with Hanwha 3U B shareholders."

The Korea Exchange decided to delist Hanwha 1U on June 30, stating that the number of listed shares had fallen below 200,000 for two consecutive half-year periods (recorded at 199,033 shares). Hanwha 1U will undergo liquidation trading until July 14, with the final delisting scheduled for July 15.

In response, Hanwha 1U minority shareholders recently issued a statement claiming, "Hanwha could have maintained the listing by holding just 967 more shares, but deliberately reduced the number." They are demanding either a 1:1 conversion of preferred shares to common shares or that Hanwha buys back the shares at 112,000 won per share, which is equivalent to the book value per share (BPS).

Hanwha argues that it has followed legitimate procedures, having disclosed its delisting plan a year ago and announced its own share buyback and cancellation plan in July last year, explicitly stating the purpose was delisting. The company also points out that it conducted a public tender offer at 40,500 won per share, which is 11% higher than the share price before the disclosure, and repeatedly announced the possibility of delisting.

Regarding the minority shareholders' demand for a buyback at BPS, Hanwha stated, "This price is 37% higher than the closing price as of June 30 (71,100 won), and 151% higher than the average price in the first half of the year (44,600 won). It is also significantly higher than the price of common shares, which carry voting rights." The company further noted, "The third preferred shares are essentially no different from the first preferred shares, and are currently trading at around 40,000 won, so a buyback at BPS would not be fair to other shareholders."

As the demands of the Hanwha 1U Minority Shareholders' Alliance became known, existing Hanwha common shareholders also began expressing dissatisfaction. The market anticipates that collective action by common shareholders could intensify conflicts among shareholders. Hanwha stated, "Even after delisting, we are carefully considering follow-up measures such as off-market buybacks to ensure that shareholder liquidity is not completely lost. We will continue to make prudent and responsible decisions to fairly protect the rights and interests of all shareholders and to maintain the soundness and order of the capital market."