Hyungji I&C Announces Large-Scale Rights Offering and Reverse Stock Split - Increased Financial and Delisting Risks
- The company plans to issue 2,800,000 common shares (65.17% dilution) via rights offering and public offering, raising approx. 13.08 billion won (expected issue price 4,670 won). Proceeds will fund a new online brand launch (8 billion won) and debt repayment (5.08 billion won).
- A 10:1 reverse stock split (par value 500 won unchanged) effective April 13, 2026, reducing shares from 42,962,622 to 4,296,262. Purpose: offset retained deficit and meet listing maintenance conditions.
- FY2025 consolidated sales fell 10.5% YoY to 50.8 billion won, operating loss of 7.0 billion won (swing to loss), net loss of 8.9 billion won. Negative operating cash flow for third consecutive year (-3.4 billion won).
- Debt ratio at end-2025: 80.36%, net debt 6.3 billion won, debt dependence 20.43%. Interest coverage ratio -5.05x, indicating weak interest payment capacity. Total borrowings 12.65 billion won, 78.92% short-term, high refinancing risk.
- Sales declined for three consecutive years since 2023; operating losses since 2024. Worsening profitability due to polarization in apparel market and delayed online transition. Restructuring 29 offline stores in 2024-2025.
- Inventory of 24.7 billion won, 29.95% aged >1 year; allowance for impairment 4.7 billion won (15.85%). Inventory turnover 1.97x vs industry average 11.29x. Allowance for trade receivables increased to 30.62%.
- Pending litigation: one case as defendant (approx. 2.2 billion won, breach of distribution contract with Italian firm). Recognized impairment loss on investment in associate Hyungji Elite of 1.46 billion won in 2025. Contingent liability: fund replenishment obligation of 8 billion won for Hyungji Seonkyeong Second ABS.
- Major shareholder (19.03%) and related parties' low participation in the offering could dilute their stake to 12.16%, posing risk to management stability. Chairman Choi Byung-oh's joint guarantee on Songdo property debt (approx. 115 billion won) adds risk.
- Delisting risk: from July 2026, market cap threshold 20 billion won and penny stock (<1,000 won) rules tighten. March 2026 average market cap was ~20.9 billion won, near the threshold. If the offering is cancelled, capital erosion may lead to supervised stock designation.
- Despite raising 51 billion won from capital markets over the past 5 years (2021 BW 12.5B, 2022 rights 18B, 2023-24 CB/BW 8.5B, 2025 rights 12B), performance failed to improve. Further dilution and potential additional fundraising.
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KOSDAQ Filing Information
- Filing: [Correction of Description] Securities Registration Statement (Equity Securities)
- Company: Hyungji I&C (011080)
- Submission: Hyungji I&C
- Receipt: 05-07-2026