K Auction Issues 29.5 Billion KRW Convertible Bonds: Potential Dilution of 16.5% Raises Shareholder Value Concerns
On September 22, 2022, K Auction resolved to issue 29.5 billion KRW in unsecured private placement convertible bonds to LB Next Unicorn Fund. The bonds carry zero coupon and mature on September 26, 2027.
The entire proceeds will be used for operating funds, specifically for product purchases to support business activities.
The conversion price is 6,564 KRW, 148% above the current stock price of 2,645 KRW, making conversion unfavorable in the near term. However, if converted, the new shares would amount to 4,494,210 shares, representing a 16.5% dilution of existing shares. The bonds include a one-year conversion restriction and put option clauses.
[AI Summary]Despite the large potential dilution, the high conversion price relative to market price limits immediate shareholder value erosion. However, should the stock price rise, conversion could significantly dilute existing shareholders. The use of proceeds for working capital lacks clear growth catalysts, warranting a cautious outlook.
KOSDAQ Filing Information
[Correction of Description] Report on Major Matters (Decision on Issuance of Convertible Bonds)