Samsung SDI's capital increase under review

Korea Herald

19-03-2025

Samsung SDI faced shareholder backlash following a drop in stock price after raising 2 trillion won ($1.4 billion) through a paid-in capital increase to fund battery facility investments.
During a shareholders' meeting, concerns were raised about why the company opted for a capital increase rather than issuing corporate bonds, which could have protected existing shareholders from dilution. A capital increase involves issuing new shares to raise funds without incurring interest burdens, unlike bank loans or bonds, but it often negatively impacts stock prices by diluting existing shareholders' equity.
Earlier in the day, reports emerged that the Financial Supervisory Service had selected Samsung SDI as the first company to undergo its newly introduced review system for paid-in capital increases.
Samsung SDI CEO Choi Joo-sun addressed the situation, saying, "We will thoroughly explain the purpose of the capital increase to the authorities," during a meeting with reporters in Gangnam, Seoul, on Wednesday. He added that he only learned of the FSS review through media reports.
Later in the day, FSS Governor Lee Bok-hyun commented during a press briefing, stating, "Samsung SDI's capital increase is a positive investment. …We will ensure that investors are well-informed about the capital increase and expedite the review process so the company can secure funding swiftly."
Samsung SDI CFO Kim Jong-sung explained the rationale behind the capital increase, stating, "Our financial structure has weakened due to significant capital expenditures and proactive R&D investments aimed at mid-to-long-term growth." He emphasized the need to strengthen financial stability to navigate external and internal volatility.
Kim further noted that the company's borrowings have increased by over 5 trillion won in the past year and are expected to rise further in 2025 and 2026. He added, "With interest rates rising, securing funding has become increasingly challenging. This is why we prioritized the capital increase."
He also mentioned that Samsung Electronics, Samsung SDI's largest shareholder, may participate in the capital increase, while the company explores alternative funding options such as issuing corporate bonds or leveraging other assets. The funds raised will be allocated to investments in the US joint venture with General Motors, the Hungarian plant, and next-generation technologies, including all-solid-state batteries.
When asked about the potential repeal of the US Inflation Reduction Act (IRA) under a second Donald Trump administration, Choi responded, "The three major battery companies — LG Energy Solution, Samsung SDI, and SK On — are working with the Korea Battery Industry Association and we have dispatched representatives to Washington to address the issue."