South Korea Watchdog Questions Purpose Of Hanwha Aerospace's $2.5 Billion Share Issue

South Korea's financial regulatory authority has asked Hanwha Aerospace to clarify how its proposed 3.6 trillion won ($2.46 billion) equity raise aligns with a larger strategy to reorganise the company. Last week, the Financial Supervisory Service (FSS) halted the defence firm's contentious capital-raising initiatives, citing that its submission lacked essential information for shareholders to make informed investment choices and directed it to provide a revised submission.

"The restructuring of affiliate ownership and its significance to the share issuance strategy, along with the effects of the restructuring on the company, should be adequately acknowledged," FSS Senior Deputy Governor Hahm Yong-il mentioned during a briefing.

On March 21, the day following the announcement of the plan, Hanwha Aerospace's shares experienced their worst day since early November 2016, plummeting 13 per cent, as analysts questioned the purpose and necessity of raising capital. Hanwha Group, the seventh-largest conglomerate in South Korea, declared on Monday that Chairman Kim Seung Youn was transferring an 11.32 per cent share in Hanwha Aerospace's parent company, Hanwha Corp, to his sons as a part of the succession plan.

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On Tuesday, Hanwha Aerospace announced that its executives, including Kim Seung Youn's son, have purchased company shares worth approximately 9 billion won, demonstrating their commitment to enhancing shareholder value. The debate surrounding Hanwha's share issuance proposal was the latest in a succession of significant capital-raising efforts, such as those by battery producer Samsung SDI and Korea Zinc (010130.KS), opening a new tab, which faced investor backlash in light of South Korea's wider initiative for corporate governance reforms. Hanwha Aerospace's shares rose by 7.5 per cent, while the KOSPI stock index increased by 1.8 per cent as of 0445 GMT.