The Financial Supervisory Service (FSS) is actively requiring corrections to securities registration statements for capital increases that may harm the rights of common shareholders, raising the bar for fundraising among listed companies. The number of correction requests made by the FSS this year has increased by nearly 50% compared to the same period last year. While companies are seeking funds to improve their financial structures and expand their businesses due to stricter delisting requirements, financial authorities are scrutinizing the purposes of fund usage and shareholder protection measures more rigorously.
According to the FSS's electronic disclosure system, a total of 265 listed companies, including 50 on the KOSPI and 215 on the KOSDAQ, announced capital increase decisions this year. This marks a 44.0% increase from 184 companies during the same period last year. However, the amount raised through capital increases from January to May this year was 1.814 trillion won, a 27.7% decrease from 2.508 trillion won in the same period last year. Although companies are pushing for capital increases, the stringent review process by financial authorities has led to a decline in actual fundraising outcomes.
A notable example is Hanwool Semiconductor, which submitted its fourth correction to its securities registration statement on July 16, reducing the scale of its capital increase. The number of shares offered was cut from 4.7 million to 3.8 million, and the fundraising amount was lowered from 22.8655 billion won to 19.076 billion won. The allocation ratio of new shares to existing shares was also adjusted from 0.7049 to 0.5643. This reduction was made following repeated correction requests from financial authorities, which prompted the company to revise its board resolution.
ToolGen also submitted its third correction report on the same day. After receiving two correction requests from the FSS on June 1 and July 2, the company enhanced its communication procedures with shareholders in this report. It publicly announced its plan to hold an investor relations (IR) meeting on July 1 and included details of a face-to-face briefing held on July 9 at the Korea Financial Investment Education Institute.
Since last year, financial authorities have prioritized the review of capital increases that may harm shareholder rights, intensifying their scrutiny. They are not only requiring simple disclosure corrections but are also comprehensively examining the basis for discount rate calculations, fund usage plans, potential conflicts of interest with major shareholders, and the necessity of third-party allocations.
This year, the most notable cases involved Hanwha Solutions and EcoPro BM. Hanwha Solutions attempted a 2.4 trillion won capital increase on March 26 to improve its financial structure but received two correction requests from the FSS. After modifying its securities registration statement three times, it ultimately reduced the capital increase to 1.7 trillion won and passed the review.
EcoPro BM also decided on a shareholder allocation capital increase of approximately 1.2 trillion won on June 30 but received its first correction request from the FSS on July 14. The company explained that the funds were for growth investments, including a nickel refining project in Indonesia and a factory investment in Hungary, but financial authorities demanded clarifications on the necessity of the investments, fund usage plans, and measures to protect common shareholders. As of July 20, the company has not submitted a correction report.
While the industry agrees with the policy direction of strengthening shareholder protection, there are concerns that the burden of fundraising for companies is increasing. A financial investment industry official stated, "It is becoming increasingly difficult for listed companies to raise funds through various methods such as capital increases, convertible bonds (CB), and bonds with warrants (BW). The heightened scrutiny is raising the perceived costs of maintaining a listing, which may weaken the incentive to remain publicly traded."
* This article has been translated by AI.
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