KOREA ADVANCED MATERIALS Decides to Issue 10 Billion Won Convertible Bonds, Resulting in 5.9% Dilution and Expected Downward Pressure on Stock Price
KOREA ADVANCED MATERIALS decided to issue 10 billion won worth of 3rd unregistered unsecured private convertible bonds.
The coupon rate is 4.0% with maturity in 2029 and the conversion price is set at 2,802 won, a 7.8% premium over the closing price on the decision date.
Upon conversion, 3,568,879 new shares will be issued, resulting in a 5.9% dilution of existing shares, raising concerns about shareholder value.
The bonds include a put option allowing early redemption at par from June 10, 2027.
The proceeds will be used to acquire securities of other corporations, but the specific target has not been disclosed yet.
The buyers are Spacial Investment a related party of the largest shareholder with 5 billion won and Hitpark with 5 billion won.
[AI Summary]This 10 billion won CB issuance causes a 5.9% dilution negatively impacting short-term stock price but if the funds are used for growth M&A long-term value may increase. The private placement to related parties raises governance risks and investors should monitor the use of proceeds and acquisition target.