On 25 June 2026 the board of LIG Defense & Aerospace Co., Ltd. (KRX:079550) — the company listed until this spring as LIG Nex1 — resolved to issue 876,153 new preferred shares at ₩570,676 each. The total is ₩499,999,489,428, essentially ₩500bn, and every won of it is designated as facility investment across 2026 to 2028.
Five days later, at 30 June, the company's balance sheet showed ₩42,670,409,161 of cash and equivalents. Against total assets of ₩8,761.9bn.
That is a cash balance equal to about half of one percent of assets, at a company that had ₩546.9bn at the end of FY2024. The two facts belong together.
The trajectory is steep. Cash and equivalents: ₩546.9bn at the end of FY2024, ₩125.2bn at the end of FY2025, ₩15.0bn at the end of March 2026, ₩42.7bn at the end of June.
Operating cash flow explains it. FY2024 produced ₩951.9bn. FY2025 consumed ₩584.3bn. The first half of 2026 consumed ₩618.7bn on the cumulative basis Korean interim statements use — worse in six months than the whole of the prior year.
That swing of more than ₩1.5tn between FY2024 and FY2025 is not a profitability problem. Operating income went up over the same span, from ₩223.4bn to ₩319.4bn, and first-half 2026 operating income of ₩276.8bn was 44.8% ahead of the prior year. What changed is timing.
Defence contracts, particularly large export contracts, pay substantial advances at signature. LIG collected those advances in 2023 and 2024 on the export orders it won, and it is now spending them building what it sold. Advances arrive once; costs recur for years. A company in the middle of delivering a large export backlog burns cash by design.
Financing has been filling the gap. Activities brought in ₩439.1bn in FY2025 and ₩715.0bn across the first half of 2026. Total liabilities reached ₩7,121.2bn at the end of June against equity of ₩1,640.6bn — a ratio of 4.34, up from 2.22 at the end of FY2022.
The structure is worth explaining because it is unusual and deliberate.
LIG has 22,000,000 common shares outstanding, unchanged for a decade. It did not issue any. It created a new class of preferred stock and placed all of it privately with a single investor, K-Defense Growth No.1 LLC, described in the filing as having an "other" relationship to the company and its largest shareholder — meaning unrelated. The filing says the board selected the investor after considering its intent, ability to fund, and timing, in service of corporate management objectives. The shares carry a one-year mandatory holding period.
Common shareholders are therefore not diluted on the common line at all. The new preferred amounts to roughly 4% of the common count and sits alongside it rather than inside it.
The pricing follows a formula the filing sets out in full. A common reference price of ₩815,252 was derived as the lower of the most recent day's volume-weighted price and the arithmetic mean of the one-month, one-week and latest-day weighted averages. The preferred was then priced at ₩570,676 — a 30% discount to that reference.
To justify the 30%, the filing tabulates the discount at which listed Korean preferred shares trade against their common lines. The comparables range enormously: Korean Air's preferred at a 1.4% discount over a year, Yuhan at 11.6%, Hite Jinro at 19.1%, Samsung Fire at 25.4%, NPC at 37.9%, S-Oil at 44.9%, LG Electronics at 54.8%, Kolon Industries at 52.8%, Amorepacific at 65.3%. Thirty percent sits close to the middle of that distribution, which makes it defensible rather than generous.
One detail that changes how to read the interim accounts. The payment date is 16 September 2026, with share certificates on 7 October. The ₩500bn was not in the 30 June balance sheet and is not in the company's hands as of late August.
So the ₩42.7bn cash figure is real and current, and the ₩715.0bn of first-half financing inflow was borrowing, not this placement. LIG is running the business on debt and customer advances until the middle of September.
That is uncomfortable but not alarming for a defence contractor. Contract liabilities from a sovereign customer are the safest funding in industry, and current liabilities of ₩6,417.7bn are overwhelmingly that rather than bank debt. Still, a company with ₩42.7bn of cash has no room for a delayed milestone payment, and the second quarter's ₩618.7bn cumulative operating outflow was the largest six-month burn on file.
Take the other side. LIG is doing what a defence company scaling from ₩2.3tn of revenue in FY2023 to ₩4.3tn in FY2025 is supposed to do: build capacity ahead of a backlog it has already won. The order book stood at roughly ₩23.5tn at the second quarter, about 5.7 years of sales at the current run rate. Spending ₩500bn on facilities against that is not speculative — the customers are already contracted.
The financing choice is also shareholder-friendly in the way that matters most to Korean investors. Management could have done a rights issue and diluted the common; it could have placed common shares with a friendly party. Instead it created preferred stock, priced it against a documented benchmark, locked the buyer up for a year, and left the common register untouched. That is a more careful structure than most Korean issuers bother with.
And the borrowing has a purpose with an end date. Facility investment running 2026 to 2028 is a defined programme, not open-ended.
The risk is concentration of timing. LIG's cash position depends on export milestone payments from a small number of governments, and those payments move for reasons that have nothing to do with LIG's performance — budget cycles, political changes, currency arrangements. A single delayed instalment from a Middle Eastern customer, against ₩42.7bn of cash, is a real financing event rather than a rounding error.
The second risk is that ₩500bn does not turn out to be enough. If the capacity programme runs to 2028 and operating cash flow stays negative through the delivery phase, there is a second raise coming, and the next one may not be able to avoid the common shares.
The 16 September payment. Confirmation that K-Defense Growth No.1 funded in full, on time, is the first thing.
Second, the third-quarter cash flow statement. Nine-month cumulative operating cash flow better than the first half's negative ₩618.7bn would mean the burn is decelerating as deliveries convert to collections. Worse than that, with the backlog still growing, means the working capital cycle has further to run and the ₩500bn will be consumed faster than the 2028 schedule implies.
Third, whether any further capital raising is announced before year-end. One placement to fund a defined programme is planning. A second within twelve months is a pattern.
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