SEOUL, April 10 (AJP) - South Korea’s financial regulator has put the brakes a 2.4 trillion won ($1.7 billion) rights offering by Hanwha Solutions, in a move that is drawing attention to the group’s broader capital-raising practices and governance structure.
The Financial Supervisory Service (FSS) on April 9 ordered the company to revise its securities filing, citing incomplete formal requirements and insufficient or unclear disclosure of key information that could hinder investor decision-making.
The request suspends the effectiveness of the filing, delaying the company’s plan to raise fresh capital at a time when its financial position has come under increasing pressure.
Hanwha Solutions had announced on March 26 that it would issue new shares worth 2.4 trillion won, with 1.5 trillion won earmarked for debt repayment and the remaining funds allocated to investments in solar and other businesses. The scale of the issuance — equivalent to roughly 42 percent of existing shares — triggered an immediate market backlash, with shares plunging more than 20 percent over two sessions.
While the company framed the move as necessary to stabilize its balance sheet and support future investment, investors criticized the structure as shifting the burden of financial restructuring onto shareholders through significant dilution.
The latest regulatory intervention comes amid growing scrutiny of large-scale equity financing across the Hanwha group, where similar transactions have repeatedly triggered sharp market reactions.
Hanwha Aerospace offers a notable precedent. In March last year, the company approved a record 3.6 trillion won rights offering — the largest in Korean market history — to fund defense investments, including overseas production expansion and unmanned aerial vehicle engine development. Despite its growth-oriented rationale, the announcement led to a more than 13 percent drop in share price the following day.
Investor backlash intensified over concerns about dilution and capital allocation, particularly given the company’s strong operating cash flow at the time. The controversy eventually forced a revision of the plan, with the offering size reduced to 2.3 trillion won and part of the funding shifted to a third-party allotment involving group affiliates.
The sequence — large-scale equity issuance, sharp share price decline, and subsequent structural adjustment — has established a recurring pattern in the group’s capital strategy.
That pattern has also intersected with governance concerns. In the case of Hanwha Aerospace, criticism extended beyond financing structure to questions about ownership consolidation, following transactions that increased the controlling family’s influence within key affiliates.
Against this backdrop, market participants say the FSS’s latest move signals a shift toward more proactive oversight of equity financing that may materially impact minority shareholders.
“The regulator appears to be responding not just to disclosure issues, but to repeated market concerns over how capital raising is structured,” an industry official said.
Despite the regulatory setback, the group has sought to signal support. Hanwha Corp., which holds about 36.7 percent of Hanwha Solutions, has committed to fully subscribe to its allocation and take up an additional 20 percent in oversubscription, investing about 843.9 billion won.
The move is widely seen as an attempt by the controlling shareholders to share the financial burden, even as questions persist over how that burden is ultimately distributed between the group and minority investors.
Hanwha Solutions said it would “take the regulator’s request seriously” and prepare a revised filing that reflects feedback from shareholders and the market, emphasizing that it would prioritize shareholder value.
Still, the underlying challenge remains unresolved. With net debt exceeding 12 trillion won and leverage rising sharply following years of aggressive investment, the company faces mounting pressure to secure funding without triggering further shareholder resistance.
The latest intervention raises a broader question for the Hanwha group: how to balance large-scale investment, financial stability and shareholder value, as regulatory scrutiny intensifies and investor tolerance for dilution continues to narrow.
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