UMC's Decline Reason Found? Convertible Bonds Trigger Selling Pressure, Institutions Sell 120,000 Shares, Analyst Reveals Key to

UMC (2303) has seen a significant pullback in its stock price recently. Market focus has shifted to the company's overseas convertible bonds, totaling $1.8 billion, or approximately NT$57 billion. UMC announced on the 5th the pricing of its seventh overseas unsecured convertible bonds, raising a total of $1.8 billion across two tranches. Following the news, UMC ADRs in the US market plunged 8.95%. Today (6th), UMC's intraday decline expanded to 3.6% at one point, hitting a low of NT$147, falling below the NT$150 mark. From a supply chain perspective, on the 5th, foreign investors, investment trusts, and proprietary traders were all on the selling side. The three major institutions collectively sold 120,685 UMC shares, indicating rising market concerns about this large-scale fundraising. UMC's issuance of these bonds is primarily to meet future expansion and technological layout needs. The company issued two bonds, A and B, each for $900 million, totaling $1.8 billion, with a coupon rate of 0%. The raised funds will be used entirely for purchasing machinery and equipment and constructing factory facilities. UMC has been continuously increasing its capital expenditures, focusing on new technologies such as specialty processes and silicon photonics. It also aims to capture demand for power management ICs and connectivity chips in mature processes driven by AI infrastructure. Therefore, this substantial fundraising can be seen as preparing funds for the next phase of capacity expansion. However, what the market truly worries about is not UMC 'borrowing money to expand production,' but whether this NT$57 billion can ultimately be converted into sufficient revenue and profit. Furthermore, the conversion price for tranche A is NT$179.19, and for tranche B, it is NT$202.06, both significantly higher than the closing price of NT$152.5 on the 5th.