South Korea’s defense giant Hanwha Aerospace and other Hanwha Group stocks dropped sharply on March 21 after the company announced a major stock sale plan the previous day.
Hanwha Aerospace shares fell 13.3% to 627,000 won in early trading. The company plans to raise 3.6 trillion won ($2.5 billion) through a rights offering, with two-thirds allocated for acquiring stakes in other companies and the rest for facility investments. Analysts expect the funds to go toward overseas defense projects (1.6 trillion won), domestic defense (900 billion won), shipbuilding (800 billion won), and unmanned aircraft engines (300 billion won).
However, investors appear skeptical. They point out that alternative funding methods, such as utilizing the company’s operating profits, were available. Hanwha Aerospace’s consolidated operating profit last year amounted to 1.7 trillion won.
There are also concerns about investment risks. In 2019, Hanwha Aerospace and Hanwha Systems invested about 140 billion won in Overair, a U.S. urban air mobility (UAM) startup. But after Overair failed to get U.S. Federal Aviation Administration (FAA) approval, the investment was written off last year.
The rights offering also weighed on Hanwha Group stocks. Hanwha shares dropped 10.42%, while Hanwha Systems, Hanwha Engine, and Hanwha Ocean fell 7.47%, 5.17%, and 3.07%, respectively.
Hanwha Aerospace said that the newly issued shares will be listed on June 24. The Financial Supervisory Service is reviewing the company’s securities registration statement. If no revisions are requested by April 3, the rights offering will proceed as planned.
