The Capital Efficiency Signal: The Year a Ratio Is Actually Measuring

On 21 September 2026 a KOSDAQ-listed company resolved a third-party share placement of roughly KRW 10bn, disclosed the following morning. The mechanics are ordinary: 4,796,163 new shares at KRW 2,085 apiece — about 16.3% of shares outstanding before the issue — priced at a 10% discount to a reference price of KRW 2,316 struck the day before the board met. Payment is due 9 November 2026, the new shares list on 30 November, and every one of them is locked up for a year. On payment, the largest shareholder changes.

The line worth stopping on is not any of those. It is the use-of-proceeds table. Purpose: working capital, in full. Schedule: KRW 4.999bn in 2027, KRW 5.00bn in 2028 and after. Two rows. The year the money actually arrives is not one of them.

What that does to the arithmetic

Capital efficiency indices read three things: return on invested capital, asset turnover, and the investment gap — the distance between capital a company holds and capital it has put to work. The first two are ratios of things that already happened. The third is usually treated the same way, as something an analyst derives after the fact.

That treatment is a habit, not a necessity. Here the gap is not derived; it is announced. The denominator's date is fixed by the payment schedule — total assets and total equity step up on 9 November, whatever else is true about the business. The numerator's date is fixed by the company's own table, and that table starts in the following fiscal year.

This matters because the interval produces a real, falling number that looks exactly like deterioration. An observer reading FY2026 ratios sees capital efficiency decline. An observer reading the September filing sees why, written out by year, seven weeks before the money moves. Same company, same facts, entirely different question answered.

Korea parallel

Korean disclosure is unusually generous on this point. The use-of-proceeds-by-year box is a standard field in placement filings, so the forward schedule of capital deployment is routinely on the public record for small-cap issuers — the segment where relational risk concentrates and where the fewest people are reading. RaymondsIndex builds its capital-efficiency reading around exactly this asymmetry: the inputs that make a ratio interpretable are often published earlier and more plainly than the ratio itself, in fields nobody has built a screener for.

Academic frame

Two older papers set up the problem. Myers and Majluf (1984, Journal of Financial Economics 13(2)) showed that when managers know more about a firm's prospects than outside investors do, the decision to issue equity carries information in itself — choice, timing and terms all signal. The natural extension is that the announced deployment schedule belongs to the same signal set, and is more specific than the issuance decision alone. Jensen (1986, American Economic Review 76(2)) came at it from the other side: cash sitting inside a firm without a committed use is where the agency problem lives, because discretion over undeployed capital is the thing that gets misused. Between them, the interesting object is neither the raise nor the ratio. It is the stated plan for the gap between the two.

Tokyo has been building institutional machinery around precisely that object. The Tokyo Stock Exchange has asked Prime and Standard companies since March 2023 to act on cost of capital and stock price; it has published a monthly list of who has disclosed since January 2024; and since a January 2025 revision, a company registered as "under consideration" remains listed for six months and must explain that status. The April 2026 update narrowed the focus to the appropriate allocation of management resources. One regime prints the timetable in the filing. The other attached an expiry date to not having a timetable at all.

What to do with this

If you are looking at a placement this week, read the year-by-year box before you read the headline amount, and note specifically whether the year of payment appears in it. Then ask the harder question: when the efficiency numbers for that fiscal year arrive, what exactly will they have measured?

General observation based on public filings. Not investment advice.

#RaymondsRisk #RelationalRisk #CorporateGovernance #DeploymentLag #InvestmentGap