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LG shares plunge 14% on reports of a rights issue

LG employee showing new phones
Image caption LG's mobile phone units has been struggling to keep pace with competitors

Shares of LG Electronics plunged at South Korea's Kospi index after reports that the company was planning to sell new shares to raise capital.

The electronics maker fell 14% to 62,000 won after reports indicated that it planned to raise as much as 1tn won ($885m; £557m).

There was speculation that the company was raising cash to support its struggling smartphone and LCD units.

Kospi has asked the company to file as explanation on the reports.

Tough times

The report comes just weeks after LG electronics reported a bigger-than-expected loss for the three months to the end of September.

The company reported a net loss 414bn won during the period, down from a 7.6bn won profit during the same period last year.

Earlier this week, ratings agency Fitch downgraded its outlook for the company to 'negative' from 'stable' saying that LG's operational competitiveness was unlikely to recover significantly in the short term.

"LG Display, which has been posting losses, needs fresh facility investments and LG Electronics as the top shareholder may need to pitch in," said John Park of Daishin Securities.

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