CJ CGV raises capital despite initial shareholder backlash

[Courtesy of CJ CGV]

CJ CGV, the largest multiplex cinema chain in South Korea, has successfully secured its targeted capital increase after overcoming initial concerns from shareholders.

On Wednesday, CJ CGV announced that it had received a total of 3.33 trillion won ($2.51 billion) in subscriptions during the past two days of public offering for 44 billion won worth of shares, leading to a competition rate of 75.7 to 1.

The latest public offering was conducted for the 7,917,643 shares of common stock generated from a half-successful subscription for existing shareholders on June 6-7. The company had previously achieved a subscription rate of 89.4 percent in the previous offering.

CJ CGV had initially planned to raise 570 billion won from existing shareholders in June and an additional 450 billion won from its largest shareholder, CJ. However, due to a decline in the stock price, the issue price was adjusted downward, resulting in a reduction of the final capital increase amount by about 130 billion won.

The strong interest from the public stemmed from the fact that the closing price of the company’s stock on the day of the offering was about 26 percent higher than the new share issue price of 5,560 won, leading to expectations of short-term gains.

However, the listing of CJ CGV’s new shares is scheduled for two weeks from now, on September 27, and during this period, stock price fluctuations may impact returns.

CJ CGV plans to utilize most of the fresh capital to repay debt.

CJ CGV’s successful capital raise is putting the company in an improved financial position and has generated optimism among some investors and analysts about its business prospects.

“If CJ CGV completes the capital increase of about 900 billion won, its debt-to-equity ratio is expected to improve to 323 percent from 1,045 percent as of the end of June, which is expected to lead to a rating upgrade,” said Kim Hoe-jae, an analyst at Daishin Securities, in a recent report. “The company’s profit next year is expected to recover to 120 percent of its 2019 levels as theaters around the world are returning to normal operations.”