A man passes by a signboard at the lobby of Korea Zinc's headquarters in central Seoul, where an emergency board meeting took place, Oct. 30. Yonhap

The Financial Supervisory Service (FSS) suspended Korea Zinc's issuance of new shares aimed at a large-scale capital increase, Wednesday.

The financial watchdog cited that the disclosure of important matters in the securities registration statement, submitted by the world's largest zinc smelter on Oct. 30, is unclear, and therefore could hinder investors' rational investment decisions or lead to significant misunderstandings for investors.

Attention is now focused on the next steps available for Korea Zinc Chairman Choi Yun-beom in his prolonged ownership fight against the alliance between private equity firm MBK Partners and Young Poong.

The FSS rejected the zinc smelter's securities registration statement and demanded corrections, based on the judgment that the firm's disclosure regarding the capital increase was insufficient.

"Korea Zinc's securities registration statement is counted as having not been accepted from the day it was submitted, thus its effectiveness is suspended," an FSS official said.

"If the company fails to submit a corrected registration statement within three months of receiving the correction request, its plan for the paid-in capital increase will be considered withdrawn."

As the watchdog effectively put the brakes on the smelter's rights offering, valued at 2.5 trillion won ($1.8 billion) and intended to boost voting shares, attention is being drawn to what Choi will do next to counter the MBK alliance, which owns the largest share in the smelting firm and is seeking to oust him.

The MBK side holds a 38.47 percent stake in the zinc smelter following its tender offer, while Choi, his family and allies collectively hold 35.4 percent after the treasury share buyback.

Some predict that Choi's side will submit a corrected registration statement within three months and push ahead with the rights offering. On the other hand, there are forecasts that he might withdraw the rights offering and immediately move to a vote battle at the next shareholders' meeting.

Market watchers noted that submitting a corrected registration statement itself is not a significant burden, but the issue is time.

To gain the upper hand in the management rights dispute, Korea Zinc must finalize the issuance of new shares before the extraordinary shareholders' meeting, as Choi's side currently lags more than 3 percent behind in shareholding.

The MBK-Young Poong coalition has already submitted a request to a Seoul court, Nov. 1, for approval to convene an extraordinary shareholders' meeting for the smelter.

Typically, when such a request is submitted to the court, the result is usually issued within two months. This suggests that the extraordinary shareholders' meeting could be held by the end of December or in January next year.

Given the current situation, it is believed that completing the rights offering before this meeting will not be easy.

Both Korea Zinc and the MBK alliance made no particular statements regarding the latest development.