Pan Ocean stock plunges on concerns over weak earnings, HMM takeover

Grand Bonanza [Courtesy of Pan Ocean]

Shares of Pan Ocean Co., a container carrier of South Korea’s Harim Group, dipped on Wednesday, a day after its parent was named as preferred bidder to buy the country’s largest container shipper HMM Co.

Pan Ocean stock fell 4.03 percent to 3,930 won ($3.02) as of 10:40 a.m. on Wednesday, rebounding slightly after reaching a 52-week low at 3,875 won upon market opening.

On Tuesday, shares of Pan Ocean fell by more than 10 percent in the wake of concerns over worsening financial soundness to fund the parent’s aggressive takeover of HMM amid weak earnings and shipping industry.

Some brokerages raise the possibility of Pan Ocean – valued at 2 trillion won – issuing shares worth up to 3 trillion won to raise capital.

“Given prospects of the possible capital raise, Pan Ocean shares are likely to continue the current downward trend in the short term,” said Bae Se-ho, an analyst at Hi Investment & Securities Co.

The analyst added that in the scenario of a capital increase of up to 3 trillion won, Pan Ocean parent Harim Holdings, with a 54.72 percent stake in the container shipper, would be required to pay 1.64 trillion won. In that case, Harim Holdings will have to weigh substantial borrowing and sale of its real estate assets.

Bae, however, said that the actual size of the capital increase may be less than 3 trillion won, given that commercial lenders already issued a letter of commitment (LOC) worth 3.2 trillion won.