Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>Hanwha Group announced another large-scale reorganization directly involving Hanwha Corp, Hanwha Aerospace, and Hanwha Impact. Several deal contracts arise, two of which require shareholder approval. However, none grants appraisal rights.</li>
<li>The market responded quite positively to this. Direct parties to the reorganization were Hanwha Corp and Hanwha Aerospace, up 7.83% and 19.93%, respectively, on Friday.</li>
<li>This event has little room for event trading for its size. We have no choice but to approach this event with outright momentum trading, which inevitably increases the risk-reward ratio.</li>
</ul>


Hanwha Group announced another large-scale reorganization directly involving Hanwha Corp, Hanwha Aerospace, and Hanwha Impact. Several deal contracts arise, two of which require shareholder approval. However, none grants appraisal rights.
The market responded quite positively to this. Direct parties to the reorganization were Hanwha Corp and Hanwha Aerospace, up 7.83% and 19.93%, respectively, on Friday.
This event has little room for event trading for its size. We have no choice but to approach this event with outright momentum trading, which inevitably increases the risk-reward ratio.


Compact Summary of Hanwha Group Reorganization

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

Korea Aerospace Industries / Equity Bottom-Up

<ul>
<li>On 29 March, Hanwha Asset Management launched the first local stocks-focused, aerospace &amp; UAM (Urban Air Mobility) themed ETF named ‘ARIRANG iSelect Aerospace &amp; UAM ETF’.</li>
<li>The share prices of the 18 stocks included in this ETF are up on average 6% YTD, outperforming KOSPI which is down 7.8% in the same period.</li>
<li>As of 30 March, iSelect Aerospace &amp; UAM ETF had a market cap of 10.1 billion won which is likely to increase much higher in the coming months. </li>
</ul>


On 29 March, Hanwha Asset Management launched the first local stocks-focused, aerospace &amp; UAM (Urban Air Mobility) themed ETF named ‘ARIRANG iSelect Aerospace &amp; UAM ETF’.
The share prices of the 18 stocks included in this ETF are up on average 6% YTD, outperforming KOSPI which is down 7.8% in the same period.
As of 30 March, iSelect Aerospace &amp; UAM ETF had a market cap of 10.1 billion won which is likely to increase much higher in the coming months. 


First Local Aerospace & UAM (Urban Air Mobility) ETF in Korea

<h2>Subscription</h2><p>Hanwha Systems will issue a total of 78,689,000 shares in this capital increase. It got a total of 73,626,614 subscriptions with an oversubscription of 10,950,101, making the final subscription rate 107.48% with no forfeited share for a public subscription.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td></tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Offering"}'>Offering</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":78689000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>78,689,000 shares</td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Main subscription"}'>Subscription</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":73626614}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=11736139+61890475">73,626,614 shares</td>
</tr>
<tr>
<td style="width: 352.5px;"> - ESOP</td>
<td style="text-align: right; width: 352.514px;">11,736,139 shares</td>
</tr>
<tr>
<td style="width: 352.5px;"> - Stockholders</td>
<td style="text-align: right; width: 352.514px;">61,890,475 shares</td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Over-subscription"}'>Over-subscription</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":10950101}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>10,950,101 shares</td>
</tr>
<tr>
<td style="width: 352.5px;"><strong>- Allocation per over-subscription</strong></td>
<td style="text-align: right; width: 352.514px;"><strong>0.4623140918 share</strong></td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"- Final subscription rate"}'><strong>Final subscription rate</strong></td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":1.0748225927385022}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-3]C[0]+R[-2]C[0])/R[-4]C[0]"><strong>107.48%</strong></td>
</tr>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Shares outstanding</h2><p>This is a massive offering at a capital increase rate of 71.39%. Accordingly, the total number of shares increased from 110,230,389 to 188,919,389. The stock dilution ratio for existing shareholders is 41.65%.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Shares outstanding"}'>Shares outstanding</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'>Offering</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":78689000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-9]C[0]">78,689,000 shares</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'><strong>Capital increase</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7138594058667433}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[2]C[0]"><strong>71.39%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.41652156730191414}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-2]C[0]/(R[-2]C[0]+R[1]C[0])">41.65%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding before the offering"}'>Shares outstanding before the offering</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":110230389}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>110,230,389 shares</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding after the offering"}'><strong>Shares outstanding after the offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":188919389}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-4]C[0]+R[-1]C[0]"><strong>188,919,389 shares</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Float adjustment</h2><p>The major shareholders, Hanwha Aerospace and H Solution, announced their participation in this capital increase through <a href="http://dart.fss.or.kr/dsaf001/main.do?rcpNo=20210607000001" target="_blank" rel="noopener">a regulatory filing</a>. Their majority shareholding has declined slightly. But the free-float rate has also dropped slightly due to an increase in the shares owned by the ESOP.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Float adjustment"}'>Float adjustment</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":2,"2":"Before the offering"}'>Before the offering</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":2,"2":"%"}'>%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":2,"2":"After the offering"}'>After the offering</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":2,"2":"%"}'>%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Hanwha Aerospace"}'><strong>Hanwha Aerospace</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":54000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>54,000,000</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.48988305756591316}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>48.99%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":88289321}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]+34289321"><strong>88,289,321</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.4673385906409003}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>46.73%</strong></td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"H Solution"}'><strong>H Solution</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":14785550}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>14,785,550</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.13413315632951273}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>13.41%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":24174187}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]+9388637"><strong>24,174,187</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.1279603280952809}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>12.80%</strong></td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Special affiliated persons"}'>Special affiliated persons</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":37617}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=15601+10708+11308">37,617</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.00034125798104549915}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">0.03%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":59482}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=24669+17881+16932">59,482</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.00031485386605818424}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">0.03%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Executives"}'>Executives</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":36514}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>36,514</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.0003312516659992917}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">0.03%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":36514}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]">36,514</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.00019327820290589655}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">0.02%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"ESOP"}'>ESOP</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":2916933}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,916,933</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.026462149199165032}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">2.65%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":14653072}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]+11736139">14,653,072</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.07756256294053544}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">7.76%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":1926128}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,926,128</td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.017473656924135505}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2">1.75%</td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":1926128}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[0]C[-2]">1,926,128</td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.01019550195559864}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2">1.02%</td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"- Non-float"}'><strong>- Non-float</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":73702742}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=sum(R[-6]C[0]:R[-1]C[0])"><strong>73,702,742</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.6686245296657712}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>66.86%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":129138704}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=sum(R[-6]C[0]:R[-1]C[0])"><strong>129,138,704</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.6835651157012793}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>68.36%</strong></td>
</tr>
<tr>
<td style="width: 217.273px;" data-sheets-value='{"1":2,"2":"Free-float"}'><strong>Free-float</strong></td>
<td style="text-align: right; width: 143.878px;" data-sheets-value='{"1":3,"3":36527647}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]-R[-1]C[0]"><strong>36,527,647</strong></td>
<td style="text-align: right; width: 88.5795px;" data-sheets-value='{"1":3,"3":0.3313754703342288}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R15C2"><strong>33.14%</strong></td>
<td style="text-align: right; width: 103.665px;" data-sheets-value='{"1":3,"3":59780685}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-11]C[-2]-R[-1]C[0]"><strong>59,780,685</strong></td>
<td style="text-align: right; width: 88.6364px;" data-sheets-value='{"1":3,"3":0.31643488429872063}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-1]/R16C2"><strong>31.64%</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Remaining schedule</h2><p>The public subscription scheduled for June 4 is canceled. The payment date is June 9, and the first trading day is June 21. In other words, you can sell new shares from June 21, two trading days ahead of the listing day. Lastly, the listing date is June 23.</p><div><div><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Timetable"}'>Remaining schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td data-sheets-value='{"1":3,"3":44351}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>June 8 (Canceled)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td data-sheets-value='{"1":3,"3":44356}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>June 11</td>
</tr>
<tr>
<td><strong>First trading day</strong></td>
<td><strong>June 21</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td data-sheets-value='{"1":3,"3":44369}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>June 23</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div></div>

SubscriptionHanwha Systems will issue a total of 78,689,000 shares in this capital increase. It got a total of 73,626,614 subscriptions with an oversubscription of 10,950,101, making the final subscription rate 107.48% with no forfeited share for a public subscription.





Subscription

Offering
78,689,000 shares


Subscription
73,626,614 shares


 - ESOP
11,736,139 shares


 - Stockholders
61,890,475 shares


Over-subscription
10,950,101 shares


- Allocation per over-subscription
0.4623140918 share


Final subscription rate
107.48%

Source: DART

Shares outstandingThis is a massive offering at a capital increase rate of 71.39%. Accordingly, the total number of shares increased from 110,230,389 to 188,919,389. The stock dilution ratio for existing shareholders is 41.65%.





Shares outstanding

Offering
78,689,000 shares


Capital increase
71.39%


Dilution
41.65%


Shares outstanding before the offering
110,230,389 shares


Shares outstanding after the offering
188,919,389 shares

Source: DART

Float adjustmentThe major shareholders, Hanwha Aerospace and H Solution, announced their participation in this capital increase through a regulatory filing. Their majority shareholding has declined slightly. But the free-float rate has also dropped slightly due to an increase in the shares owned by the ESOP.









Float adjustment
Before the offering
%
After the offering
%


Hanwha Aerospace
54,000,000
48.99%
88,289,321
46.73%


H Solution
14,785,550
13.41%
24,174,187
12.80%


Special affiliated persons
37,617
0.03%
59,482
0.03%


Executives
36,514
0.03%
36,514
0.02%


ESOP
2,916,933
2.65%
14,653,072
7.76%


Treasury shares
1,926,128
1.75%
1,926,128
1.02%


- Non-float
73,702,742
66.86%
129,138,704
68.36%


Free-float
36,527,647
33.14%
59,780,685
31.64%

Source: DART

Remaining scheduleThe public subscription scheduled for June 4 is canceled. The payment date is June 9, and the first trading day is June 21. In other words, you can sell new shares from June 21, two trading days ahead of the listing day. Lastly, the listing date is June 23.





Remaining schedule

Public subscription
June 8 (Canceled)


Payment
June 11


First trading day
June 21


Listing
June 23

Source: DART



Hanwha Systems Offering: SO/Float Changes & Index Treatment

<p><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> announced on June 7th that it successfully completed its rights offering worth 1.2 trillion won. The company will use the proceeds to expand its aerospace investments. The expected uses of the funds from the rights offering are as follows: (M&amp;A/investments of other companies - 700 billion won; working capital - 390 billion won; and facility investments - 110 billion won).</p><p>The current share price of Hanwha Systems is 17,550 won, which is 18.9% higher than the rights offering price of 14,750 won. The shareholders that participated in the rights offering could gain some profits if the price does not drop much prior to the new shares listing date (June 23rd). </p><p>In recent years, Hanwha Aerospace has been investing in high quality overseas companies with technological expertise in the aerospace industry. In particular, the company has been showing a lot of interest in the urban air mobility (UAM) such as flying cars. The company plans to develop an air taxi aircraft by 2024 and start air taxi pilot operations from 2025. In addition to UAM, the company also plans to aggressively invest in satellite communications and digital platforms. </p><p>According to the company, it received 7.4% higher purchase orders for the rights offering than the amount raised in the subscription for the company's shareholders and ESOP on June 3rd and 4th. Although the demand from the ESOP fell a bit short of allotted amount, the overall rights offering was successful, driven by <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> (largest shareholder with a 48.99% stake) and H Solution (2nd largest shareholder with a 13.4% stake) that subscribed 120% of their allocated amount. </p>

Hanwha Systems Co Ltd (272210 KS) announced on June 7th that it successfully completed its rights offering worth 1.2 trillion won. The company will use the proceeds to expand its aerospace investments. The expected uses of the funds from the rights offering are as follows: (M&amp;A/investments of other companies - 700 billion won; working capital - 390 billion won; and facility investments - 110 billion won).The current share price of Hanwha Systems is 17,550 won, which is 18.9% higher than the rights offering price of 14,750 won. The shareholders that participated in the rights offering could gain some profits if the price does not drop much prior to the new shares listing date (June 23rd). In recent years, Hanwha Aerospace has been investing in high quality overseas companies with technological expertise in the aerospace industry. In particular, the company has been showing a lot of interest in the urban air mobility (UAM) such as flying cars. The company plans to develop an air taxi aircraft by 2024 and start air taxi pilot operations from 2025. In addition to UAM, the company also plans to aggressively invest in satellite communications and digital platforms. According to the company, it received 7.4% higher purchase orders for the rights offering than the amount raised in the subscription for the company's shareholders and ESOP on June 3rd and 4th. Although the demand from the ESOP fell a bit short of allotted amount, the overall rights offering was successful, driven by Hanwha Aerospace (012450 KS) (largest shareholder with a 48.99% stake) and H Solution (2nd largest shareholder with a 13.4% stake) that subscribed 120% of their allocated amount. 

Hanwha Systems: Rights Offering Results (Higher Short Term Volatility but Bullish Longer Term)

<p>Hanwha Systems' ₩1.2T offering subscription rights trade begins <strong>May 13 (this Thursday)</strong>. It will last for 5 trading sessions until May 20.</p><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Timetable"}'>Timetable</td></tr>
<tr>
<td style="width: 364.545px;" data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'><strong>Subscription rights trade</strong></td>
<td style="text-align: right; width: 338.182px;" data-sheets-value='{"1":3,"3":44329}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 5. 13 ~ 5. 20</strong></td>
</tr>
<tr>
<td style="width: 364.545px;" data-sheets-value='{"1":2,"2":"Final pricing"}'><strong>Final pricing</strong></td>
<td style="text-align: right; width: 338.182px;" data-sheets-value='{"1":3,"3":44347}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 5. 31</strong></td>
</tr>
<tr>
<td style="width: 364.545px;">Subscription</td>
<td style="text-align: right; width: 338.182px;">2021. 6. 03</td>
</tr>
<tr>
<td style="width: 364.545px;">Payment</td>
<td style="text-align: right; width: 338.182px;">2021. 6. 11</td>
</tr>
<tr>
<td style="width: 364.545px;" data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td style="text-align: right; width: 338.182px;" data-sheets-value='{"1":3,"3":44370}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 6. 23</strong></td>
</tr>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody></table><p><strong>The 1st round price settled at ₩15,800, giving an 11.73% discount to the last close</strong>. This price of ₩15,800 will likely serve as our ceiling price in this offering.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"1st round pricing"}'>1st round pricing</td></tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Calculation period"}'>Calculation period</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":2,"2":"2021.03.20 ~ 2021.04.19"}'><div><div>2021.03.20 ~ 2021.04.19</div></div></td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Reference date"}'><strong>Reference date</strong></td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":44305}' data-sheets-numberformat='{"1":5,"2":"mmmm d","3":1}'><strong>April 19</strong></td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1-month volume weighted average price"}'>1-month volume-weighted average price (VWAP)</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20817}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,817</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1-week volume weighted average price"}'>1-week volume-weighted average price (VWAP)</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20222}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,222</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1-day close on April 19"}'>1-day close on April 19</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20600}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,600</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"(A+B+C)/3"}'>(A+B+C)/3</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20546}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩20,546</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Reference price: Min(C,D)"}'><strong>Reference Price: Min(C,D)</strong></td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":20546}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-1]C[0]"><strong>₩20,546</strong></td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Discount rate"}'>Discount rate</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":0.15}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>15.00%</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":2,"2":"71,39%"}'>71,39%</td>
</tr>
<tr>
<td style="width: 370.909px;" data-sheets-value='{"1":2,"2":"1st round price: Reference Price × (1 - 15%) / [1 + (71.39% × 15%)]"}'><strong>1st round price: Reference Price × (1 - 15%) / [1 + (71.39% × 15%)]</strong></td>
<td style="text-align: right; width: 331.818px;" data-sheets-value='{"1":3,"3":15800}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'><strong>₩15,800</strong></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><hr><p><strong>Why does this subscription rights trade deserve attention?</strong></p><div><ul>
<li>Korea now has the short-selling restriction to ban short-sellers from participating in a rights offer. Those having shorted between a day after an offering announcement day and an offering price-fixing day face the restriction.</li>
<li>But this restriction applies only to the offerings announced after April 6. <strong>This Hanwha Systems offering allows us to enjoy the loophole for the last time,</strong> as the offering announcement was made on <strong>March 29</strong>.</li>
</ul></div>

Hanwha Systems' ₩1.2T offering subscription rights trade begins May 13 (this Thursday). It will last for 5 trading sessions until May 20.
Timetable

Subscription rights trade
2021. 5. 13 ~ 5. 20


Final pricing
2021. 5. 31


Subscription
2021. 6. 03


Payment
2021. 6. 11


Listing
2021. 6. 23

Source: DART
The 1st round price settled at ₩15,800, giving an 11.73% discount to the last close. This price of ₩15,800 will likely serve as our ceiling price in this offering.





1st round pricing

Calculation period
2021.03.20 ~ 2021.04.19


Reference date
April 19


1-month volume-weighted average price (VWAP)
₩20,817


1-week volume-weighted average price (VWAP)
₩20,222


1-day close on April 19
₩20,600


(A+B+C)/3
₩20,546


Reference Price: Min(C,D)
₩20,546


Discount rate
15.00%


Capital increase rate
71,39%


1st round price: Reference Price × (1 - 15%) / [1 + (71.39% × 15%)]
₩15,800

Source: DART

Why does this subscription rights trade deserve attention?
Korea now has the short-selling restriction to ban short-sellers from participating in a rights offer. Those having shorted between a day after an offering announcement day and an offering price-fixing day face the restriction.
But this restriction applies only to the offerings announced after April 6. This Hanwha Systems offering allows us to enjoy the loophole for the last time, as the offering announcement was made on March 29.


Hanwha Systems Subscription Rights Trading Begins May 13: Should Aim at the First Day

South Korea

Hanwha Systems Co., Ltd. designs, develops, and distributes high-tech systems for the defense industry. The Company manufactures tactical communication systems, radar systems, naval combat systems, electro-optics, and fire control systems. Hanwha Systems markets its products throughout South Korea.

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