Battery boom to drive POSCO Chem's $1.1 bn rights offering

South Korea-based POSCO Chemical Co. has begun preparations for its rights offering, to the delight of shareholders as the company’s share price has been on a solid uptrend backed by the thriving secondary battery business.

Around 16.48 million new shares will be issued, accounting for approximately 27% of the total shares in circulation. Upon completion of the rights offering, POSCO Chem is expected to fetch around 1.2 trillion won ($1.1 billion).

On Jan. 4, POSCO Chem’s share price closed at 118,000 won ($109), up 13.46% from the previous trading session, and 65% higher than the estimated price of 71,500 won for new shares.

Rising anticipation for the secondary battery sector has bumped up the company's share price, outweighing concerns over potential share dilution from the rights offering.

The company's share price has seen a steady climb since announcing the rights offering two months ago. At the time, POSCO Chem's share price hovered around 83,900 won.

Subscription for shareholders is set for Jan. 13 and 14, with the price for new shares to be confirmed on Jan. 8 reflecting current share price movements. 

"Many employees and executives are planning to partake in the subscription hoping to take profit," an investment banking industry source said, adding that existing shareholders are also likely to participate.

POSCO Chem makes cathodes and anodes, key materials for electric vehicle batteries. Last year, the company announced that it would supply billions of dollars worth of cathodes for Ultium Cells LLC, a US-based joint venture between General Motors and LG Energy Solution. 

The company has been increasing its facility and equipment investments to meet the rising demand for secondary batteries. POSCO Chem plans to use most of the proceeds from the rights offering to further boost its secondary battery operations.

Meanwhile, POSCO Chem is expected to increase its rights offering amount given the strong performance of the company’s share price. Last month, the price for new shares was raised by 17% to reflect the share price movement, raising the initial 1 trillion won to 1.2 trillion won.

If the company's share price continues its uptrend, then the final rights offering amount may increase accordingly.


Write to Jinsung Kim at jskim1028@hankyung.com
Danbee Lee edited this article.