1. What Happened?

Daehan Optoelectronics announced on August 6, 2025, the exercise of its convertible bonds. This will result in the issuance of 2,534,318 new shares, representing approximately 2.22% of the current market capitalization.

2. Why Does It Matter?

The exercise of convertible bonds can significantly impact a company’s financial structure and stock price. The dilution effect from the issuance of new shares can put downward pressure on the stock price, but it can also strengthen the company’s financial health by reducing debt and increasing capital. This event is particularly important for Daehan Optoelectronics given its weak performance in Q1 2025.

3. So, What Happens to the Stock Price?

  • Short-term Impact: Downward pressure on the stock price is expected due to the dilution effect of the new share issuance. However, as the current stock price is higher than the conversion price (₩947), the incentive for conversion is high, leading to expectations of increased trading volume and volatility.
  • Long-term Impact: Converting convertible bonds into shares can improve financial health by reducing debt and increasing capital. However, there is also the possibility of dilution of corporate value due to a decrease in earnings per share (EPS). Ultimately, the long-term stock price direction will depend on how the converted funds are utilized to secure future growth momentum.

4. What Should Investors Do?

Investors should not be swayed by short-term stock price volatility and should closely monitor the company’s fundamental improvements and plans for utilizing the converted funds. In particular, the following factors should be carefully considered:

  • Market’s ability to absorb the newly issued shares
  • Whether Daehan Optoelectronics can improve profitability
  • How the converted funds will be utilized
  • Changes in the macroeconomic environment, such as exchange rates and interest rates