Hyosung Chemical's nitrogen trifluoride plant / Captured from Hyosung Chemical's website

Chemical giant Hyosung is facing increasing concerns over the group's bid to sell its industrial specialty gas unit, as the stock price of a Hyosung affiliate anticipated to take over the unit is faltering upon investors' apparent oppositions.

According to the Korea Exchange, Hyosung TNC, a chemical textile subsidiary of the group, shed 4.45 percent and closed at 204,000 won on Monday, extending its losing streak for the fifth consecutive session.

Hyosung TNC plummeted 20.63 percent on Friday after reports and rumors that the group is seeking to sell Hyosung Chemical's industrial specialty gas unit to Hyosung TNC at around 1 trillion won ($715.77 million).

Initially seeking to sell the gas unit to an outside investor, Hyosung Chemical had been negotiating with a consortium comprised of STIC Investments and IMM Private Equity for the past five months. However, the company said in its regulatory filing on Wednesday that it has withdrawn its designation of the consortium as the preferred bidder, saying the two sides "were unable to reach a mutual agreement."

The gas unit produces high-purity nitrogen trifluoride (NF3) gas, which is used as a cleaning agent in the semiconductor manufacturing process. Even though the market outlook for NF3 gas remains lucrative, the Hyosung Chemical unit relies heavily on Samsung Electronics for its sales, meaning Samsung's downturn will affect the unit's profitability as well.

Despite the gas division's disappointing valuation, Hyosung Chemical is facing an urgent need to sell the unit to address its financial constraints. The company has reported operating losses for 11 consecutive quarters and faces 1.37 trillion won in short-term debt obligations due within a year.

Against the backdrop, Hyosung TNC said on Wednesday that it has "been reviewing Hyosung Chem's inquiry on our intention to acquire the specialty gas division, but no specific decisions have been made at this point."

Since Hyosung TNC annually produces 3,500 tons of NF3 gas, acquiring the unit with 8,000 tons of yearly capacity will elevate the company to become the world's No. 2 NF3 gas producer, analysts said. However, they pointed out that there are uncertainties over how Hyosung TNC will fund the acquisition.

Hyosung TNC posted an operating profit of 1.4 trillion won in 2021 but saw it plunging to 123.6 billion won in 2022 and 213.4 billion won in 2023. As of September, the company's cash and cash equivalent remained at 98.75 billion won, meaning Hyosung TNC either has to use bonds it holds, issue new rights, or get new loans to acquire the gas unit.

"Concerns over financial structure deterioration due to additional fundraising and potential damages to shareholder value are contributing to Hyosung TNC's stock price drop," NH Investment & Securities analyst Choi Young-kwang said.