Found the Reason for UMC's Decline? Convertible Bonds Trigger Selling Pressure, Institutions Dump 120,000 Shares; Analyst Reveal

Although it won't immediately increase the share capital, if UMC's stock price rises above the conversion price in the future, bondholders may choose to convert into shares. This would increase the number of outstanding shares, potentially diluting EPS and Return on Equity. Secondly, UMC's intensive fundraising in a short period has also led the market to re-examine capital expenditure efficiency. The company launched its second domestic convertible bond with a cap of NT$4 billion in August, and now it's launching an overseas ECB of approximately NT$57 billion. Combined, these two issues exceed NT$60 billion. The market worries that if the demand for mature process nodes recovers slower than expected, a large amount of new equipment could bring depreciation and fixed cost pressures, thereby suppressing gross margins. However, foreign institutions are not entirely bearish on UMC. UBS and HSBC have previously been optimistic about the improvement in supply and demand for mature process nodes, believing that UMC could benefit from price increases in some products, improved utilization rates for 28nm capacity, and spillover demand from AI. At that time, UBS and HSBC gave target prices of NT$230 and NT$235 respectively, maintaining a 'buy' rating. Additionally, a US-based foreign institution is optimistic about AI infrastructure driving demand for PMIC and connectivity chips, expecting mature process nodes to potentially face tight supply and demand in the future, benefiting UMC. Lin Han-wei, an analyst at Moore Investment Consulting, believes that although UMC has themes related to silicon photonics and mature processes, it is not currently a mainstream focus for market funds. Furthermore, investors are awaiting September revenue data, expecting operations to continue growing, but the growth momentum is not as prominent compared to some AI stocks. On the other hand, UMC's stock price has already shown impressive performance in the previous wave, providing an incentive for short-term traders to take profits.