Korea Zinc Faces Sharp Decline in Share Price

SEOUL (Reuters) – Shares in Korea Zinc fell as much as 29.9% to their daily lower limit during Wednesday's trading session. This decline followed the announcement by the world's top zinc refiner regarding its plan to issue new stock valued at 2.5 trillion won (approximately $1.81 billion).

Background on Korea Zinc

Run by the Choi family, Korea Zinc is involved in a contentious battle for control over its $18 billion zinc empire, contending with the co-founding Chang family. The Chang family's conglomerate, Young Poong, had made an initial joint offer along with MBK in September.

Details of the Stock Issuance

In a regulatory filing, Korea Zinc disclosed that its board had resolved to issue roughly 3.73 million shares at 670,000 won each. This price represents a significant 57% decrease from Tuesday's closing price of 1,543,000 won.

To strengthen management's position, the company plans to allocate 20% of the newly issued shares to its employee ownership association, which may enhance the number of shares supportive of current management.

This unexpected decision came after Korea Zinc repurchased 9.85% of its shares at 890,000 won each in a $1.5 billion buyback initiative aimed at preventing shareholders from divesting their holdings to its largest investor, Young Poong and private equity firm MBK.

Korea Zinc believes this new share issuance will expand its shareholder base and mitigate the risks associated with being delisted from the stock market as a “national company.” The fund from the stock issuance, amounting to 2.5 trillion won, is expected to cover debt obligations, with 2.3 trillion won designated for that purpose.

The new shares are scheduled to be listed on December 18, according to the filing.

($1 = 1,382.9400 won)