Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div class="content-highlight"><p>In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.</p></div><p>Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. </p><p>Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. </p><div class="content-highlight">
<p>In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).</p>
<p>In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  </p>
</div><p>Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. </p>

In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. 
In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).
In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  
Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. 

Closing the Gap: Korean Holdcos Vs. Opcos

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

Hanwha Solutions / Equity Capital Markets

<p>Hanwha Solutions became the latest one in Korea to leverage the hyper liquid stock market.</p><p>It announced a ₩1.2T offering at a 19.5% capital increase.</p><p>20% goes to the ESPO, so the per-share allocation for stockholders sits at 0.1565.</p><p>This event has a longer schedule than usual due to two holidays, the new year and Seollal (lunar new year).</p><p>Oversubscription is 20%, and five local bankers will be serving as an underwriter, mainly due to the offering size.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Issuer"}'>Issuer</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Hanwha Solutions Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Hanwha Solutions Corp</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"009830"}' data-sheets-formula='="009830"'>009830</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Pubic offering of forfeited shares after offering to stockholders"}'>A public offering of forfeited shares after offering to stockholders</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Transferability"}'>Transferability</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Renounceable"}'>Renounceable</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Volume"}'>Volume</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":31414000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>31,414,000</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Bonus issue volume"}'>Bonus issue volume</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Preliminary price"}'>Preliminary price</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":38200}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩38,200</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Preliminary value"}'>Preliminary value</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":1200014800000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]*R[-1]C[0]">₩1,200,014,800,000</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Oversubscription privilege"}'>Oversubscription privilege</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>20.00%</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"NH, KIS, Mirae Asset, KB, &amp; Daishin"}'>NH, KIS, Mirae Asset, KB, &amp; Daishin</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":" - Underwriting type"}'>- Underwriting type</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Standby"}'>Standby</td>
</tr>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Allocation"}'>Allocation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Common"}'>Common</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":159864497}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-13]C[0], "shares")'>159,864,497</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pref (incl. RCPS &amp; CPS)"}'>Pref (incl. RCPS &amp; CPS)</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":1123737}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,123,737</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares"}'>Total shares</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":160988234}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]+R[-1]C[0]">160,988,234</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":400000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>400,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares ex treasury shares"}'>Total shares ex treasury shares</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":160588234}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">160,588,234</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offer volume"}'>Offer volume</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":31414000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">31,414,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Common"}'>- Common</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":31414000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-16]C[0]">31,414,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Per-share allocation"}'>Per-share allocation</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.15649465327578108}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000"}' data-sheets-formula="=R[8]C[0]/R[-4]C[0]">0.15649</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'>Capital increase</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.19513227283429918}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-4]C[0]/R[-7]C[0]">19.51%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.16327253248005427}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-5]C[0]/(R[-8]C[0]+R[-5]C[0])">16.33%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares after rights offer"}'>Total shares after rights offer</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":192402234}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">192,402,234</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Common"}'>- Common</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":191278497}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]+R[-7]C[0]">191,278,497</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":1123737}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]">1,123,737</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP allocation"}'>ESOP allocation</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":6282800}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>6,282,800</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-10]C[0]">20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder allocation"}'>Stockholder allocation</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":25131200}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-11]C[0]-R[-2]C[0]">25,131,200</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.8}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-12]C[0]">80.00%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Timetable"}'>Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44186}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2020. 12. 21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary pricing"}'><strong>Preliminary pricing</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44210}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 1. 14</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'><strong>Ex-rights date</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44214}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 1. 18</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44215}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 1. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'>Subscription rights trade beginning</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44232}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 2. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade ending"}'>Subscription rights trade ending</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44242}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 2. 15</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final pricing"}'><strong>Final pricing</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44246}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 2. 19</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder subscription"}'>Stockholder subscription</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44251}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 2. 24</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44257}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 3. 2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44260}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 3. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44273}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 3. 18</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The discount is 15%, less than the usual 20%.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="400">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'>1st round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 15%) / [1 + (19.51% × 15%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'>RP × (1 - 15%) / [1 + (19.51% × 15%)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44210}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[34]C[0]">2021. 1. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td data-sheets-value='{"1":2,"2":"[RP + (1st × 19.51%)] / (1 + 19.51%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 19.51%)] / (1 + 19.51%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44214}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[32]C[0]">2021. 1. 18</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'>2nd round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 15%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'>RP × (1 - 15%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44246}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[33]C[0]">2021. 2. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td data-sheets-value='{"1":2,"2":"Max [Min (1st, 2nd), 3D VWAP × 60%]"}'>Max [Min (1st, 2nd), 3D VWAP × 60%]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44246}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[31]C[0]">2021. 2. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'><strong>Discount rate</strong></td>
<td data-sheets-value='{"1":3,"3":0.15}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>15.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td data-sheets-value='{"1":3,"3":0.19509999999999997}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=LEFT(Terms!R[11]C[0],6)*100/100">19.51%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Hanwha Solutions became the latest one in Korea to leverage the hyper liquid stock market.It announced a ₩1.2T offering at a 19.5% capital increase.20% goes to the ESPO, so the per-share allocation for stockholders sits at 0.1565.This event has a longer schedule than usual due to two holidays, the new year and Seollal (lunar new year).Oversubscription is 20%, and five local bankers will be serving as an underwriter, mainly due to the offering size.





Overview

Issuer
Hanwha Solutions Corp


Ticker
009830


Target
A public offering of forfeited shares after offering to stockholders


Transferability
Renounceable


Volume
31,414,000


Bonus issue volume
0


Preliminary price
₩38,200


Preliminary value
₩1,200,014,800,000


Oversubscription privilege
20.00%


Banker
NH, KIS, Mirae Asset, KB, &amp; Daishin


- Underwriting type
Standby

Source: DART







Allocation

Common
159,864,497


Pref (incl. RCPS &amp; CPS)
1,123,737


Total shares
160,988,234


Treasury shares
400,000


Total shares ex treasury shares
160,588,234


Offer volume
31,414,000


- Common
31,414,000


- Pref
0


Per-share allocation
0.15649


Capital increase
19.51%


Dilution
16.33%


Total shares after rights offer
192,402,234


- Common
191,278,497


- Pref
1,123,737


ESOP allocation
6,282,800


- %
20.00%


Stockholder allocation
25,131,200


- %
80.00%

Source: DART







Timetable

BOD meeting
2020. 12. 21


Preliminary pricing
2021. 1. 14


Ex-rights date
2021. 1. 18


Record date
2021. 1. 19


Subscription rights trade beginning
2021. 2. 5


Subscription rights trade ending
2021. 2. 15


Final pricing
2021. 2. 19


Stockholder subscription
2021. 2. 24


Public subscription
2021. 3. 2


Payment
2021. 3. 5


Listing
2021. 3. 18

Source: DART

The discount is 15%, less than the usual 20%.





Pricing

1st round
RP × (1 - 15%) / [1 + (19.51% × 15%)]


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]


- Reference date
2021. 1. 14


Ex-rights base price
[RP + (1st × 19.51%)] / (1 + 19.51%)


- Reference price (RP)
Previous close


- Reference date
2021. 1. 18


2nd round
RP × (1 - 15%)


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP)]


- Reference date
2021. 2. 19


Final
Max [Min (1st, 2nd), 3D VWAP × 60%]


- Reference date
2021. 2. 19


Discount rate
15.00%


Capital increase rate
19.51%

Source: DART



Hanwha Solutions ₩1.2T Rights Offer: Terms & Trade Approach

Equity Bottom-Up

<p>This is an update to our report <a href="https://www.smartkarma.com/insights/a-surge-in-value-of-nikola-corp-tesla-of-hydrogen-trucks-a-merger-of-hanwha-corp-h-solutions" target="_blank" data-smartkarma-citation="insights:40177" rel="noopener">A Surge in Value of Nikola Corp - 'Tesla' of Hydrogen Trucks: A Merger of Hanwha Corp &amp; H-Solutions?</a> (9 June 2020). Since then, <a href="https://www.smartkarma.com/entities/hanwha-solutions" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Solutions (009830 KS)</a>'s shares are up 69%.</p><p><strong>On 16 August, it was<a href="https://n.news.naver.com/article/015/0004399417?cds=news_edit" target="_blank" rel="noopener"> announced</a> that Hanwha General Chemical (36% owned by Hanwha Solutions) has secured the rights to operate 1,200 hydrogen charging stations for Nikola in North America. </strong>Overall, the Hanwha Group will play a big role in the overall value chain of the partnership between Nikola for the hydrogen ecosystem involving hydrogen production, storage, charging, and operation of the hydrogen charging stations.</p><div><p><strong>Overall, we like what the company is trying to do in trying to become a one-stop-shop provider of hydrogen-based infrastructure. We think that in the near-term with the announcement of the Hanwha Group securing the rights of 1,200 hydrogen charging stations, this will have a positive boost on Hanwha Solutions and that it could reach nearly 37,000 won per share (about 20% upside from current levels) which would represent 1.0x P/B.  </strong></p></div>

This is an update to our report A Surge in Value of Nikola Corp - 'Tesla' of Hydrogen Trucks: A Merger of Hanwha Corp &amp; H-Solutions? (9 June 2020). Since then, Hanwha Solutions (009830 KS)'s shares are up 69%.On 16 August, it was announced that Hanwha General Chemical (36% owned by Hanwha Solutions) has secured the rights to operate 1,200 hydrogen charging stations for Nikola in North America. Overall, the Hanwha Group will play a big role in the overall value chain of the partnership between Nikola for the hydrogen ecosystem involving hydrogen production, storage, charging, and operation of the hydrogen charging stations.Overall, we like what the company is trying to do in trying to become a one-stop-shop provider of hydrogen-based infrastructure. We think that in the near-term with the announcement of the Hanwha Group securing the rights of 1,200 hydrogen charging stations, this will have a positive boost on Hanwha Solutions and that it could reach nearly 37,000 won per share (about 20% upside from current levels) which would represent 1.0x P/B.  

Hanwha General Chemical Secures Rights for 1,200 Hydrogen Charging Stations in North America

<p>Nikola announced that it will start to receive reservations for the sales of its main trucks 'Badge' from the end of June. In November 2018, the Hanwha Group invested $100 million (120 billion won) in Nikola Corp for a 6.1% stake. Currently, a 6.1% stake in Nikola is worth $1.6 billion. The Hanwha Group has hit a home run in its investment in Nikola as its stake in value has surged 16x in one and a half years.  </p><div class="content-highlight"><p><em>The sharp increase in the value of Nikola Corp could result in a merger of H-Solution and <a href="https://www.smartkarma.com/entities/hanwha-corporation" target="_blank" data-smartkarma-citation="entities:10619:1" rel="noopener">Hanwha Corporation (000880 KS)</a>, which could reduce the long-awaited risks about the transfer of the ownership of the Hanwha Group from the Chairman to his sons and also improve the overall transparency of the Hanwha Group.</em></p></div><p>Among the Hanwha Group's public companies, Hanwha Solution and Hanwha Corp have indirect investment stake in the Nikola Corp. If we multiply 6.13% x 50% x 36%, this would be only 1.1% which would be Hanwha Solution's investment stake in Nikola Corp. Currently, a 1.1% stake in Nikola Corp is worth $290 million. So a key question is, <em>"From the end of April 2020 to June 9th, 2020, Hanwha Solution's market cap increased by 26% (608 billion won) and how much of this was due to the rapid rise in the value of Nikola Corp?" </em>One could argue that a good portion of this increase was due to the sharp appreciation of Nikola Corp shares and the other main factor is the increased investors' confidence that COVID-19 could be controlled which has renewed investors' enthusiasm in stocks. </p>

Nikola announced that it will start to receive reservations for the sales of its main trucks 'Badge' from the end of June. In November 2018, the Hanwha Group invested $100 million (120 billion won) in Nikola Corp for a 6.1% stake. Currently, a 6.1% stake in Nikola is worth $1.6 billion. The Hanwha Group has hit a home run in its investment in Nikola as its stake in value has surged 16x in one and a half years.  The sharp increase in the value of Nikola Corp could result in a merger of H-Solution and Hanwha Corporation (000880 KS), which could reduce the long-awaited risks about the transfer of the ownership of the Hanwha Group from the Chairman to his sons and also improve the overall transparency of the Hanwha Group.Among the Hanwha Group's public companies, Hanwha Solution and Hanwha Corp have indirect investment stake in the Nikola Corp. If we multiply 6.13% x 50% x 36%, this would be only 1.1% which would be Hanwha Solution's investment stake in Nikola Corp. Currently, a 1.1% stake in Nikola Corp is worth $290 million. So a key question is, "From the end of April 2020 to June 9th, 2020, Hanwha Solution's market cap increased by 26% (608 billion won) and how much of this was due to the rapid rise in the value of Nikola Corp?" One could argue that a good portion of this increase was due to the sharp appreciation of Nikola Corp shares and the other main factor is the increased investors' confidence that COVID-19 could be controlled which has renewed investors' enthusiasm in stocks. 

A Surge in Value of Nikola Corp - 'Tesla' of Hydrogen Trucks: A Merger of Hanwha Corp & H-Solutions?

Korea Event-Driven and Corporate Governance, DewPoint Research

Yeaseul Lim

Korea Event-Driven and Corporate Governance

Independent Equity Research Provider - South Korea

DewPoint Research

At DewPoint, we aim to convey a clear understanding of a company’s approach to capital allocation. As a matter of corporate governance, capital allocation reflects whose interests a company prioritizes when making management decisions. Given the Korean context, it comes down to a question of whether the company undermines the interests of minority shareholders for private benefits of controlling shareholders. This is what we focus on as a fundamental starting point in our research.
 
Capital allocation principles and practices provide the foundation for a company’s sustainable value creation. Thus, investors need to be alert to any possible distortions in capital allocation, especially when they take a long-term perspective. They also want to find safe stocks with committed management, no separation between ownership and control, and robust business models. We seek to fulfill such needs in a disciplined manner.
 
We also work as a representative of foreign investors who are willing to exercise active ownership in their investee companies. Our service may include identifying stocks that are fundamentally strong but vulnerable to activist attacks.

<p><strong>On January 6, 2020, <a href="https://www.smartkarma.com/entities/hanwha-chemical-corp" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Chemical (009830 KS)</a> finalized a merger of its wholly-owned subsidiary (Hanwha Q Cells &amp; Advanced Materials) into the company and renamed it to "Hanwha Solution".</strong> Hanwha Q Cells &amp; Advanced Materials was created through a merger between Hanwha Q Cells Korea and Hanwha Advanced Materials in August 2018. While the latter was a Hanwha Chemical's wholly-owned subsidiary, Hanwha Q Cells Korea was held 60% by private companies owned by controlling families. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/471/original/Hanwha_ownership.png?1581996684" class="editor-image img-responsive" data-smartkarma-image-id="118471"></figure>
<div class="content-caption">Hanwha Group's Ownership Structure (Simplified version)</div>
<p>A week later, local news reported that Hanwha Solution began the process of issuing corporate bonds worth 200 billion won to pay off its maturing debt carried over from the merged subsidiary. <strong>As seen below, Hanwha Chemical's</strong><strong> debt-to-equity ratio increased from 52.3% to 92.7% (of Hanwha Solution) after the merger. </strong>The debt-to-equity ratio of Hanwha Q Cells &amp; Advanced Materials was higher than 500% mainly due to its large amounts of long-term debt (745 billion won) of which Hanwha Q Cells Korea had contributed 91% (680 billion won).</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/512/original/Hanwha%20Chemical_debt%20burden.png?1581999092" class="editor-image img-responsive" data-smartkarma-image-id="118512"></figure>
<div style="text-align: left;" class="content-caption">*We used the 3rd quarter financial results to calculate debt-to-equity ratios and estimate financial debt burden of Hanwha Chemical before the merger. Hanwha Q Cells &amp; Advanced Materials was recently established, so the latest financial statements are not available. The filings for the merger do not include specific numbers about its financial position. So, we roughly calculated its estimated amounts of debt by a summation of Hanwha Q Cell Korea's debt and Hanwha Advanced Materials' debt as of December 31, 2017 (before they were merged with each other)</div>
<table class="table table-striped">
<colgroup> <col> <col> <col> <col> <col> </colgroup>
<tbody>
<tr>
<td style="width: 140.889px;">
<p>Financial Position (unit: 100 million won)</p>
</td>
<td style="text-align: left; width: 131.111px;">Hanwha Chemical (As of Sep 31, 2019) </td>
<td style="text-align: left; width: 126.667px;">
<p>(A) Hanwha Q Cells Korea (As of Dec 31, 2017)</p>
</td>
<td style="text-align: left; width: 126.667px;">
<p>(B) Hanwha Advanced Materials</p>
<p>(As of Dec 31, 2017)</p>
</td>
<td style="text-align: left; width: 115.111px;">(A+B) Hanwha Q Cells &amp; Advanced Materials </td>
</tr>
<tr>
<td style="width: 140.889px;">Short-Term Debt </td>
<td style="text-align: right; width: 131.111px;">3,828</td>
<td style="text-align: right; width: 126.667px;">1,149</td>
<td style="text-align: right; width: 126.667px;">2,241</td>
<td style="text-align: right; width: 115.111px;">3,390</td>
</tr>
<tr>
<td style="width: 140.889px;">Long-Term Debt </td>
<td style="text-align: right; width: 131.111px;">134</td>
<td style="text-align: right; width: 126.667px;">6,804</td>
<td style="text-align: right; width: 126.667px;">650</td>
<td style="text-align: right; width: 115.111px;">7,454</td>
</tr>
<tr>
<td style="width: 140.889px;">Corporate Bonds </td>
<td style="text-align: right; width: 131.111px;">13,370</td>
<td style="text-align: right; width: 126.667px;">2,483</td>
<td style="text-align: right; width: 126.667px;">1,043</td>
<td style="text-align: right; width: 115.111px;">3,526</td>
</tr>
<tr>
<td style="width: 140.889px;">Cash and Cash Equivalents </td>
<td style="text-align: right; width: 131.111px;">2,174</td>
<td style="text-align: right; width: 126.667px;">975</td>
<td style="text-align: right; width: 126.667px;">46</td>
<td style="text-align: right; width: 115.111px;">1,021</td>
</tr>
<tr>
<td colspan="5" style="width: 140.889px;"><em>Source: Company data</em></td>
</tr>
</tbody>
</table>
<p>Most local media presented positive views on this latest merger, saying that Hanwha Group was focusing efforts on chemical and solar businesses. Although this might be partly true, <strong>we rather think that this merger can be interpreted as a signal warning investors about the underlying misalignment of interests facing Hanwha Solution (Hanwha Chemical).</strong></p>
<hr>
<h2><strong>Why Hanwha Solution Is More Vulnerable To Governance Risks</strong></h2>
<p>H-Solution, which is a family-owned private company, is the most important key to implementing succession plans for Hanwha Group. Controlling families are interested in increasing the value of H-Solution such that they can secure enough control over the Group by merging H-Solution with <a href="https://www.smartkarma.com/entities/hanwha-corporation" target="_blank" data-smartkarma-citation="entities:10619:1" rel="noopener">Hanwha Corporation (000880 KS).</a> H-Solution has held a majority stake in many different private companies directly or indirectly, such as Hanwha Energy, Hanwha General Chemical, and Hanwha Q Cells Korea. <strong>Among large-sized publicly-listed firms within the Group, Hanwha Solution (Hanwha Chemical) is apparently most suitable for being taken advantage of to support H-Solution and other private companies. Here are some reasons why. </strong></p>
<div class="content-highlight">
<ul>
<li>
<p><strong>A Separation between Ownership and Control:</strong> Controlling families hold indirect ownership (cash flow rights) of only 11.8% in Hanwha Solution but are able to effectively exercise control over management. Meanwhile, the families hold 100% cash flow rights in H-Solution and Hanwha Energy. </p>
</li>
</ul>
<ul>
<li>
<strong>Business Portfolios (Compared to Hanwha Aerospace):</strong> Controlling families' cash flow rights in <a href="https://www.smartkarma.com/entities/hanwha-aerospace-co-ltd" target="_blank" data-smartkarma-citation="entities:504:1" rel="noopener">Hanwha Aerospace (012450 KS)</a> is also only about 11%. However, the key difference between Hanwha Aerospace and Hanwha Solution is that the latter has been heavily involved in internal transactions with affiliates (non-subsidiaries). Hanwha Solution runs chemical raw materials and solar businesses. The company also has processing and distribution business segments. Hanwha Energy, Hanwha General Chemical, Hanwha Total, and Hanwha Q Cells Korea, which are (or were) indirectly owned by controlling families, have been engaged in relevant businesses to varying degrees. The amounts of raw materials Hanwha Solution bought from those affiliates for the fiscal year of 2018 accounted for nearly 45% of its total COGS. Meanwhile, <a href="https://www.smartkarma.com/entities/hanwha-aerospace-co-ltd" target="_blank" data-smartkarma-citation="entities:504:1" rel="noopener">Hanwha Aerospace (012450 KS)</a> operates in three segments: aviation and defense, security, and industrial equipment. The company runs those businesses mostly through wholly-owned subsidiaries and has negligible amounts of internal transactions. Such that, Hanwha Aerospace is less likely to face alleged unfair trade practices.</li>
</ul>
</div>
<h2><strong>Hanwha Solution's Capital Allocations And Ongoing Risks</strong></h2>
<p>We found out three types of value-destroying capital allocations that Hanwha Solution (<a href="https://www.smartkarma.com/entities/hanwha-chemical-corp" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Chemical (009830 KS)</a>) has done over the years. </p>
<ul>
<li>
<strong>Self-dealing transactions with Hanwha Q Cells Korea:</strong> In the Detail Section, we provide detailed information about how those transactions have had an adverse impact on <a href="https://www.smartkarma.com/entities/hanwha-chemical-corp" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Chemical (009830 KS)</a>. However, the relevant risks seem to be disappearing as Hanwha Q Cells &amp; Advanced Materials was finally merged into Hanwha Chemical, though Hanwha Solution (the post-merger company) incurred large amounts of debt that came along. </li>
<li>
<strong>Sales transactions with <a href="https://www.smartkarma.com/entities/han-express-co-ltd" target="_blank" data-smartkarma-citation="entities:19441:1" rel="noopener">Han Express (014130 KS)</a>:</strong> Hanwha Solution has been a major client of Han Express, which is held 47% by siblings of Kim Seung-yeon, Hanwha Group Chairman. This seems problematic but is not directly linked to an issue of raising the value of H-Solution.</li>
<li>
<strong>Selling raw materials to Hanwha Energy:</strong> Hanwha Energy buys raw materials from Hanwha Solution and its subsidiaries. Hanwha Energy is a wholly-owned subsidiary of H-Solution. The company has also seen a dramatic improvement in credit ratings after selling off its indirect stake in Hanwha Q Cells Korea to Hanwha Chemical. Hanwha Energy is the last one left to be used by controlling shareholders to pocket some money and/or expand control over the Group. That is why we see that risks facing Hanwha Solution have not been resolved yet. </li>
</ul>
<p><em>In Detail, we will take a closer look at some historical patterns of unfair wealth transfer and identify risks that remain unresolved. While we mainly discuss Hanwha Solution (<a href="https://www.smartkarma.com/entities/hanwha-chemical-corp" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Chemical (009830 KS)</a>) here, we will cover </em><em>Hanwha General Chemical (2020 IPO candidate) and <a href="https://www.smartkarma.com/entities/hanwha-systems-co-ltd" target="_blank" data-smartkarma-citation="entities:28308:1" rel="noopener">Hanwha Systems Co Ltd (272210 KS)</a> in a separate insight with a focus on their money-making mechanisms.</em></p>

On January 6, 2020, Hanwha Chemical (009830 KS) finalized a merger of its wholly-owned subsidiary (Hanwha Q Cells &amp; Advanced Materials) into the company and renamed it to "Hanwha Solution". Hanwha Q Cells &amp; Advanced Materials was created through a merger between Hanwha Q Cells Korea and Hanwha Advanced Materials in August 2018. While the latter was a Hanwha Chemical's wholly-owned subsidiary, Hanwha Q Cells Korea was held 60% by private companies owned by controlling families. 

Hanwha Group's Ownership Structure (Simplified version)
A week later, local news reported that Hanwha Solution began the process of issuing corporate bonds worth 200 billion won to pay off its maturing debt carried over from the merged subsidiary. As seen below, Hanwha Chemical's debt-to-equity ratio increased from 52.3% to 92.7% (of Hanwha Solution) after the merger. The debt-to-equity ratio of Hanwha Q Cells &amp; Advanced Materials was higher than 500% mainly due to its large amounts of long-term debt (745 billion won) of which Hanwha Q Cells Korea had contributed 91% (680 billion won).

*We used the 3rd quarter financial results to calculate debt-to-equity ratios and estimate financial debt burden of Hanwha Chemical before the merger. Hanwha Q Cells &amp; Advanced Materials was recently established, so the latest financial statements are not available. The filings for the merger do not include specific numbers about its financial position. So, we roughly calculated its estimated amounts of debt by a summation of Hanwha Q Cell Korea's debt and Hanwha Advanced Materials' debt as of December 31, 2017 (before they were merged with each other)

      



Financial Position (unit: 100 million won)

Hanwha Chemical (As of Sep 31, 2019) 

(A) Hanwha Q Cells Korea (As of Dec 31, 2017)


(B) Hanwha Advanced Materials
(As of Dec 31, 2017)

(A+B) Hanwha Q Cells &amp; Advanced Materials 


Short-Term Debt 
3,828
1,149
2,241
3,390


Long-Term Debt 
134
6,804
650
7,454


Corporate Bonds 
13,370
2,483
1,043
3,526


Cash and Cash Equivalents 
2,174
975
46
1,021


Source: Company data



Most local media presented positive views on this latest merger, saying that Hanwha Group was focusing efforts on chemical and solar businesses. Although this might be partly true, we rather think that this merger can be interpreted as a signal warning investors about the underlying misalignment of interests facing Hanwha Solution (Hanwha Chemical).

Why Hanwha Solution Is More Vulnerable To Governance Risks
H-Solution, which is a family-owned private company, is the most important key to implementing succession plans for Hanwha Group. Controlling families are interested in increasing the value of H-Solution such that they can secure enough control over the Group by merging H-Solution with Hanwha Corporation (000880 KS). H-Solution has held a majority stake in many different private companies directly or indirectly, such as Hanwha Energy, Hanwha General Chemical, and Hanwha Q Cells Korea. Among large-sized publicly-listed firms within the Group, Hanwha Solution (Hanwha Chemical) is apparently most suitable for being taken advantage of to support H-Solution and other private companies. Here are some reasons why. 



A Separation between Ownership and Control: Controlling families hold indirect ownership (cash flow rights) of only 11.8% in Hanwha Solution but are able to effectively exercise control over management. Meanwhile, the families hold 100% cash flow rights in H-Solution and Hanwha Energy. 




Business Portfolios (Compared to Hanwha Aerospace): Controlling families' cash flow rights in Hanwha Aerospace (012450 KS) is also only about 11%. However, the key difference between Hanwha Aerospace and Hanwha Solution is that the latter has been heavily involved in internal transactions with affiliates (non-subsidiaries). Hanwha Solution runs chemical raw materials and solar businesses. The company also has processing and distribution business segments. Hanwha Energy, Hanwha General Chemical, Hanwha Total, and Hanwha Q Cells Korea, which are (or were) indirectly owned by controlling families, have been engaged in relevant businesses to varying degrees. The amounts of raw materials Hanwha Solution bought from those affiliates for the fiscal year of 2018 accounted for nearly 45% of its total COGS. Meanwhile, Hanwha Aerospace (012450 KS) operates in three segments: aviation and defense, security, and industrial equipment. The company runs those businesses mostly through wholly-owned subsidiaries and has negligible amounts of internal transactions. Such that, Hanwha Aerospace is less likely to face alleged unfair trade practices.


Hanwha Solution's Capital Allocations And Ongoing Risks
We found out three types of value-destroying capital allocations that Hanwha Solution (Hanwha Chemical (009830 KS)) has done over the years. 


Self-dealing transactions with Hanwha Q Cells Korea: In the Detail Section, we provide detailed information about how those transactions have had an adverse impact on Hanwha Chemical (009830 KS). However, the relevant risks seem to be disappearing as Hanwha Q Cells &amp; Advanced Materials was finally merged into Hanwha Chemical, though Hanwha Solution (the post-merger company) incurred large amounts of debt that came along. 

Sales transactions with Han Express (014130 KS): Hanwha Solution has been a major client of Han Express, which is held 47% by siblings of Kim Seung-yeon, Hanwha Group Chairman. This seems problematic but is not directly linked to an issue of raising the value of H-Solution.

Selling raw materials to Hanwha Energy: Hanwha Energy buys raw materials from Hanwha Solution and its subsidiaries. Hanwha Energy is a wholly-owned subsidiary of H-Solution. The company has also seen a dramatic improvement in credit ratings after selling off its indirect stake in Hanwha Q Cells Korea to Hanwha Chemical. Hanwha Energy is the last one left to be used by controlling shareholders to pocket some money and/or expand control over the Group. That is why we see that risks facing Hanwha Solution have not been resolved yet. 

In Detail, we will take a closer look at some historical patterns of unfair wealth transfer and identify risks that remain unresolved. While we mainly discuss Hanwha Solution (Hanwha Chemical (009830 KS)) here, we will cover Hanwha General Chemical (2020 IPO candidate) and Hanwha Systems Co Ltd (272210 KS) in a separate insight with a focus on their money-making mechanisms.

Hanwha Solution (Hanwha Chemical): Misalignment of Interests, Wealth Transfer, and Ongoing Risks

South Korea

Hanwha Corporation imports and exports petrochemicals, machinery, automotives, electronics, and steel.  The Company also produces explosives for the defense and construction industries.  In addition, Hanwha manufactures automotive airbag inflators and telecommunication equipment, such as wireless phones and provides financial services through its subsidiaries.

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Hanwha Corporation (000880 KS)

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