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[Alpha Biz=(Chicago) Reporter Paul Lee] As LG Electronics participates in the paid-in capital increase of LG Display (LGD) worth about 1.36 trillion won, it supports strengthening competitiveness of organic light-emitting diode (OLED) business.
LG Electronics recently held a board meeting and announced on the 19th that it will participate in LGD's paid-in capital increase for financing to strengthen OLED business competitiveness and future growth base. LG Electronics is a major shareholder with a 37.9% stake in LGD and will invest about 500 billion won in this paid-in capital increase. Earlier in the day, LGD said it will carry out a 1.36 trillion won paid-in capital increase to secure investment funds and stabilize its financial structure.
The market believes that the reason why LGD is raising paid-in capital for the first time since it was listed on the securities market is due to its increased debt ratio and interest burden. In fact, LGD's debt ratio soared from 215% at the end of the second quarter of this year to 322.2% at the end of the third quarter of this year. This is due to a sharp drop in demand for OLED panels, the flagship product, due to the prolonged global economic recession that has hit since the COVID-19 boom. On the same day, LGD shares closed at 11,830 won, down 3.90% from the previous day, as shareholders concerned about dilution went on sale.
In fact, LGD plans to use the funds secured through the capital increase as facility investment and operating funds in the OLED business sector, where the market is expected to recover next year.
The proportion of OLED businesses in LGD sales is expected to exceed 60% next year from 40% last year and 50% this year.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
