Korea Zinc’s $1.8 bn capital increase plan faces regulatory pushback

(Yonhap)

Korea Zinc Inc.’s 2.5 trillion won ($1.8 billion) rights offering plan could face regulatory obstacles as financial authorities signaled plans to review the offering plan, calling the move “unexpected for investors.”

Korea Zinc on Wednesday announced a plan to issue about 3.73 million new shares at an estimated price of 670,000 won each, representing 18 percent of its 20.7 million outstanding shares.

However, the timing raised concerns as the announcement came right after the company’s decision to use a large loan to buy back and re-sell its shares. A regulatory official said Korea Zinc “should be able to provide a logical explanation between the two plans,” along with other details, including how the offer price was determined and whether it is reasonable.

The announcement drove Korea Zinc’s shares to the day’s low, closing at 1.08 million won. Reports indicate that the Financial Supervisory Service (FSS) may require Korea Zinc to submit a revised filing to frustrate the rights offering. The FSS previously used similar measures to stop a merger between Doosan Robotics Inc. and Doosan Bobcat Inc.