[Reporter’s Notebook] How Did Hanwha’s Stock Price Surge Happen?

Clarified Structure and Commitment to Shareholder Returns
Spin-Off Wins Market Trust

After the announcement of the spin-off, Hanwha Corporation's stock price surged for two consecutive days. On January 14, the day of the announcement, the stock price soared by more than 25% compared to the previous trading day. On the following trading day, it rose by over 6%. Although the stock turned bearish on the morning of January 16 due to profit-taking, the price, which started the new year in the 80,000 won range, touched the 130,000 won mark, drawing cheers from retail investors.

The type of spin-off in which shareholders receive shares in both the surviving and newly established companies is generally regarded as positive news in the stock market. However, the intensity of this reaction was too strong to be explained solely by the effects of the spin-off. Even compared to the 15% stock price increase seen when news broke in April 2024 about Hanwha Aerospace pursuing a spin-off, Hanwha Corporation’s stock response this time was notably higher.

The decision to proceed with the spin-off was not made overnight. Prior to the resolution, Hanwha Corporation’s board of directors reviewed hundreds of pages of materials in several pre-briefings. The changes to the financial structure under the spin-off, the business composition of the surviving and newly established entities, and the impact on stock price and shareholder value after the split were itemized and organized. The effects on the stock price and the changes that shareholders would experience were repeatedly discussed.

The market responded not only to the restructuring itself but also to the conditions presented alongside it. Through this spin-off, the surviving entity will retain businesses such as defense, shipbuilding, and energy, which have recently shown relatively clear results and order flows. The expectation that the discount factor, which arose from bundling multiple businesses into a single entity, would be reduced and that the core business value could be reflected more intuitively, was factored into the stock price.

The same applies to the newly established entity. Different types of businesses have been organized under a single framework. The management structure has been simplified, and a foundation has been established to separately assess the performance of each business. The increased flexibility for future strategic choices also influenced investment decisions. The market recognized that a more concrete picture of the post-spin-off structure had been presented.

Hanwha also announced a shareholder return policy, including the cancellation of treasury shares, in conjunction with the spin-off. The shares to be canceled are 4.45 million common shares, excluding those reserved for employee compensation (RSU), which accounts for about 5.9% of the total common shares. Based on market value, this amounts to approximately 450 billion won. In addition, the company decided to increase the dividend per share by 25%, from 800 won to 1,000 won. This reflects consideration for the portion to be returned to shareholders alongside the restructuring.

The post-spin-off stock surge of Hanwha Corporation can be seen as the result of the combined effects of the restructuring, enhanced shareholder returns, and the mid- to long-term outlook for Hanwha’s core businesses. This confirms that if board discussions go beyond a mere formal approval process and include both the direction of the restructuring and measures to enhance shareholder value, the company can win the market’s trust.