[At a Crossroads: Listed Companies] Fantagio③ Clever Lock-up Avoidance... What About the 30%+ Volume?

[Asia Economy Reporter Jang Hyowon] The largest shareholder of Fantagio has changed to L&A Holdings. This is because several corporations, including L&A Holdings, jointly acquired the shares from GNC Partners under the existing stock purchase agreement.

Although L&A Holdings became the largest shareholder, there was no one-year lock-up on the shares. They cleverly avoided the lock-up application criteria. As a result, about 31% of the shares could flood the market at any time.

The office of L&A Holdings located in Samseong-dong, Seoul.

◆ L&A Holdings Generated Sales but the Office is ‘Locked’

According to the Financial Supervisory Service's electronic disclosure on the 2nd, Fantagio's largest shareholder changed from Gold Finance Korea to L&A Holdings. L&A Holdings acquired part of the shares being liquidated after the bankruptcy of Gold Finance Korea’s parent company, the Chinese JC Group. L&A Holdings invested 5.5 billion KRW to secure 8,333,334 shares (11.46%) of Fantagio.

Earlier in April, Gold Finance Korea contracted to transfer all its shares, 22,775,800 shares (31.3%), to GNC Partners for a total of 15 billion KRW. GNC Partners paid a 3 billion KRW deposit in advance but could not pay the remaining balance alone and, together with five other companies including L&A Holdings, paid 12 billion KRW.

L&A Holdings was established in 2018 and was formerly named Arenel Partners. The disclosure states that the acquisition cost of 5.5 billion KRW was from its own funds, but its capital stock is only 300 million KRW. Also, although Jeong Jae-sang is listed as the CEO, he resigned in April, and currently Park Mo is the registered CEO.

The business purposes of L&A Holdings include management consulting, entertainment, and cosmetics manufacturing. However, upon visiting their office in Samseong-dong, Seoul, the office door was firmly closed. There was no sign of business activity. People working on the same floor said they had rarely seen the office door open.

When asked where they actually conduct business, L&A Holdings replied that the office is located elsewhere but did not disclose the location or the nature of their work.

Under the Capital Markets Act, if a nominal company (paper company) or association becomes the largest shareholder, a one-year lock-up on the shares held is mandatory. This is to prevent entities with unclear substance from disturbing the market after acquiring shares.

However, L&A Holdings did not impose a lock-up. The criterion for being considered a nominal company under the Capital Markets Act is an annual sales revenue of less than 300 million KRW, but L&A Holdings recorded exactly 300 million KRW in sales last year.

◆ No Lock-up on 31% of Shares

Including L&A Holdings, GNC Partners, JSN Partners, Bazen International, Haenaem Holdings, and Global HS also did not impose lock-ups on their shares. This means that 22,775,800 shares, or 31.3% of the total shares, could flood the market. Fantagio’s closing price the previous day was 945 KRW, which is 43.2% higher than their acquisition price of 660 KRW per share.

In fact, GNC Partners has a history of selling shares immediately after acquiring them during the acquisition of Daeyang Metal. On December 31 last year, Daeyang Metal’s largest shareholder transferred 47.65% of shares to the F&D Consortium. GNC Partners participated in the F&D Consortium and received 3,093,710 shares at 4,200 KRW per share.

GNC Partners sold 2,103,822 shares over two days from the day they received the shares until January 2, through over-the-counter and off-hours trading, at prices ranging from 5,800 to 12,040 KRW. Daeyang Metal’s stock price hit the lower limit for two consecutive days on January 2 and 3, plummeting from the 15,000 KRW range to the 5,000 KRW range.

A representative of the party acquiring Fantagio said, “The corporations including L&A Holdings that acquired the old shares this time are expected to be financial investors (FIs). We heard that they do not plan to sell the shares until the paid-in capital increase of 20 billion KRW is completed by the end of this month.”