[After CB Issuance] NSN, CB Conversion Volume to Flood Before Christmas

[Asia Economy Reporter Yoo Hyun-seok] Concerns about overhang (large-scale pending supply) are emerging as NSN's convertible bond (CB) stock conversion volume is released all at once. Stocks equivalent to 18% of the total issued shares could flood the market.

According to the Financial Supervisory Service on the 9th, NSN will list 7,904,274 new shares on the 21st following a total CB conversion request worth 10.9 billion KRW. This volume corresponds to the 18th and 19th series, with a conversion price of 1,379 KRW. The previous day's closing price was 1,645 KRW, so if the stock price is maintained until the listing date, investors could gain a 19% profit.

Last year, NSN issued the 18th series CB worth 7.6 billion KRW to raise operating funds for biomedical business research and development (R&D), clinical trials, and raw material and product purchase payments. The issuers were Baro Savings Bank and Joeun Savings Bank, allocated 5 billion KRW and 2.6 billion KRW respectively. The nominal and maturity interest rates were 2% and 4%, respectively. The 19th series CB issued around the same time was also targeted at Baro Savings Bank and Joeun Savings Bank, with a total issuance of 5.1 billion KRW, 3 billion KRW and 2.1 billion KRW respectively.

Until August, NSN was more likely to redeem the bonds rather than convert them into stocks. On August 21, the stock price recorded 872 KRW during trading, which was lower than the conversion price. However, the stock price began to surge from early last month. The price rose from 1,045 KRW on November 2 to as high as 2,115 KRW on the 3rd.

As the novel coronavirus (COVID-19) resurged, social distancing measures were strengthened. Due to restrictions on going out, the number of people complaining of depression or lethargy, known as 'Corona Blue,' increased, highlighting Neurosona, NSN's affiliate's brain disease treatment device.

Neurosona is developing a brain disease treatment device using Low-Intensity Focused Ultrasound (LIFU). Clinical trials are underway using the brain disease treatment device 'Neurosona (NEUROSONA)' for various brain diseases such as depression, anxiety disorders, and dementia.

With the stock price surging, CB investors are interpreted to have demanded immediate conversion requests. The conversion request period for the 18th and 19th series CB is from the 6th of this month to November 6, 2022. The 6th was a holiday.

This conversion request could be a burden due to overhang. The volume to be converted this time is 7,904,274 shares, which corresponds to 18.14% of the total volume (43,562,330 shares).

Additionally, remaining convertible bonds are also a concern. The CBs currently eligible for immediate conversion are the 16th, 17th, 18th, and 19th series. The total convertible shares amount to 3,248,729 shares, representing 7.45% of the current volume.

Furthermore, there are CBs that can be converted in the future. NSN has issued the 20th, 21st, and 22nd series CBs. The total amount is 11.11 billion KRW. The convertible shares total 9,074,002 shares, accounting for 20.82% of the total. The conversion eligibility dates are from the 12th for the 20th series, and from September 28 next year for the 21st and 22nd series.