SK square shares fall on growing concerns about share sale

2023. 6. 30. 10:06
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[Courtesy of SK square]
Shares of SK square Co. dropped on Thursday in the wake of an announcement of a large-scale rights offering by its SK shieldus Co. subsidiary the previous day. However, the plunge recovered after the company explained the share sale is to repay its debt.

SK square shares fell 1.23 percent Thursday. In early trade, the price once dropped by nearly 8 percent.

The drop came after SK square announced raising 1.9 trillion won ($1.44 billion) from share issuance on Wednesday. According to the announcement, SK shieldus will issue new shares worth 1.98 trillion won. Of the funds to be secured, 199.9 billion won will be spent on business operations and the remaining 1.78 trillion won for debt repayment, the company said.

South Korean brokerages said that more investors are becoming afraid of share issuance, as major stocks, including CJ CGV Co. and SK innovation Co., have recently sought to raise large-scale funds from rights offerings. Share issuance has emerged as an alternative option for companies to secure new funds as they deal with financial crunches amid rising interest rates.

According to market insiders, the drop in SK square might stem from such uncertainty among investors worried about the company’s financial conditions.

However, industry experts have stated that the share sale, which is part of the assumption of SK shieldus’ 1.8 trillion won debt by Korea Security Holdings Co. (KSH), a parent company of SK shieldus, will not affect the market value of SK shieldus.

SK shieldus is expected to utilize the funds secured in the issuance to repay all of its debt, while KSH will secure another borrowing by using its 100 percent stake in newly issued shares of SK shieldus as collateral for the borrowing.

Swedish global investment organization EQT Partners signed a contract to purchase a 33 percent share of SK shields from SK square, and the entire 36.87 percent stake in the consortium previously held by Macquarie Infrastructure Asset Management, a private fund management. SK square and EQT Partners will have a whole stake in KSH, with SK shieldus as a wholly-owned subsidiary of KSH.

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