CJ CGV stock hits record low as court disapproves of third-party rights offering

[Courtesy of CJ CGV]

Shares of CJ CGV Co., the cinema chain of South Korean conglomerate CJ Corp., hit a new low on Tuesday after the court put the brakes on its plan for a rights offering to a third party.

Shares of CJ CGV were trading at 5,610 won ($4.19) Tuesday morning, down 1.23 percent from the previous day’s close.

Shortly after the opening bell, the stock dropped 3.17 percent to 5,500 won, setting a new record for the lowest price since being listed in 2004.

On Monday, the court dismissed CJ CGV’s request for a rights issue investigation in a non-contentious case, finding that the appraisal report by Ernst & Young Han Young Corp., which was responsible for appraising the deal, lacked objectivity.

The court concluded that the value of CJ OliveNetworks Co.’s shares estimated by Ernst & Young Han Young was likely overvalued given the large difference between the company’s net assets and CJ CGV’s share value.

As a result, CJ’s plan to raise funds by contributing all of its shares in CJ OliveNetworks to CJ CGV in kind and acquiring new shares from CJ CGV through a rights offering is up in the air, full of uncertainties.

CJ CGV’s shares had plunged 25.46 percent on Monday as the stock was open for rights sales ahead of the new share listing through an equity rights offering worth more than 400 billion won.

The new shares from the equity rights offering were priced at 5,560 won per share, significantly lower than the closing price of 7,620 won on the previous trading Friday, suggesting that investors exercised their rights in advance to avoid the impact of oversupply on the listing day.