Lodbrok becomes REC Silicon’s 2nd largest investor amid Hanwha dispute
Hanwha solar modules. Source: Hanwha Group
Lodbrok Capital LLP announced today it has built a stake that makes it the largest shareholder in REC Silicon ASA (OSE:RECSI) other than South Korea’s Hanwha Group, noted it could buy even more shares and once again fired shots at the board of the Norway-based company for not ameliorating its previously shared concerns.
In a new letter to REC Silicon’s board of directors, the investment firm says it now owns just over 3% of the shares in the polysilicon and silicon gas producer and still holds close to 20% of its 2023 senior secured bond. According to Lodbrok, the only company that has more REC Silicon shares is the Hanwha Group, which became the largest shareholder through Hanwha Solutions Corp (KRX:009830) and Hanwha Corp (KRX:000880) in the spring of 2022.
Earlier this month, Lodbrok expressed certain governance concerns in relation to an upcoming extraordinary general meeting (EGM) at which REC Silicon shareholders are supposed to vote on certain board member appointments. Lodbrok fears that, if the proposed appointees are approved, Hanwha will occupy half of the seats on the board. The root of the problem is that the Korean conglomerate, being just a one-third shareholder, is currently discussing a contract for the vast majority of REC Silicon’s production.
Last week, REC Silicon defended the recent key appointments within its top management and board of directors but left Lodbrok disappointed with the explanation. The investment firm said it saw no concrete actions to address the concerns outlined in the initial letter and reiterated that it will reject all proposals at the meeting unless it is postponed to identify an additional board candidate who is not related to Hanwha.
“Your response detailed the qualifications and expertise of the new CEO and the proposed directors, but failed to address the crux of the issue, being the potential conflicts of interests in Hanwha effectively hand picking a new CEO and CFO (the latter joining directly from Hanwha) and occupying an effective control of the REC board during a time where Hanwha is negotiating a potentially company-defining contract with REC,” Lodbrok’s latest letter reads.
According to the investor, a significant number of fellow shareholders have now reached out to it “in sympathy of [its] concerns”. Moreover, some current and potential customers of REC Silicon have indicated interest in discussing this matter with Lodbrok, “which may suggest that the concerns transcend the shareholder base into the wider value chain [...].”
If Lodbrok’s suggestions are disregarded again, the investment firm will consider buying more REC Silicon shares or aligning with other shareholders for the purpose of summoning another general meeting. It will also propose an independent investigation of any related party matters.