Eoflow: Rights Offering of 82 Billion Won and [Medtronic & Eoflow - Don't You Forget About Me]

• After the market close on 21 August, Eoflow (294090 KS) announced a rights offering capital raise of 9.1 million new shares, representing share dilution of 23%.

• Based on the expected rights offering issue price of 9,040 won, the company is expected to raise 82.2 billion won in this capital raise.

• Eoflow has monthly cash burn rate of about 3.3 billion won. If the rights offering is successful, it would have adequate capital resources for about a couple of years.

After the market close on 21 August, Eoflow (294090 KS) announced a rights offering capital raise of 9.1 million new shares. Based on the expected rights offering issue price of 9,040 won, the company is expected to raise 82.2 billion won in this capital raise. Of this amount, Eoflow plans to use 57.3 billion won for working capital, 20 billion won for debt repayment, and 5 billion won for investments.

The effective date of the rights offering is on 28 October. The subscription period is from 31 October to 1 November. Rights offering new shares will be listed on 22 November. KB Securities is the lead banker on this deal.

Eoflow currently has 30.4 million outstanding shares. This represents share dilution of 23%. The expected rights offering price of 9,040 is 27.4% lower than closing price on 21 August (12,460 won).

We believe that this rights offering is likely to have a negative impact on the company's share price in the near term (next several days). However, over a longer period, we expect the company to reinvest the capital raise proceeds into its core business and this will likely have a positive impact on its share price in the next 6-12 months.