[Bio Shaking the Market] Yang Won-seok, CEO of GTreeBNT, Sells Alone Before Stock Plunge ②

[Asia Economy Reporter Jang Hyowon] It has been revealed that Yang Wonseok, CEO and largest shareholder of bio company GTreeBNT, separately sold part of his shares over-the-counter when transferring his holdings to Bayside Private Equity (PE) in February.

Notably, this timing was two weeks before GTreeBNT announced the clinical trial results of its dry eye treatment, prompting voices in the market to point out a 'moral hazard.'

Moreover, CEO Yang stated at the time that he would transfer the shares to a private equity fund (PEF) and become a subordinated investor in that PEF, maintaining control without issues. However, none of Yang’s shares have been returned to him to date.

CEO Yang Wonseok Cashed Out Shares Ahead of Clinical Results Announcement

According to the Financial Supervisory Service’s electronic disclosure on the 15th, CEO Yang sold 717,190 shares (2.65%) on February 26 at 23,500 KRW per share, totaling 16.8 billion KRW, to GTree Holdings. GTree Holdings is a PEF established by Bayside PE.

The company stated, “CEO Yang is expected to acquire the position of the largest subordinated investor in the management-participating private equity fund that is the major shareholder of GTree Holdings.” Although Yang transferred shares to GTree Holdings, his control is said to remain solid.

However, Yang’s actual control has diminished. The initial stock purchase agreement signed on December 29 last year stipulated that Bayside PE would acquire all 1,053,890 shares (3.92%) owned by Yang. Yet, on the payment day, about 1.27% of the shares suddenly decreased.

According to the disclosure, GTree Holdings currently holds only 2.65% of GTreeBNT shares. Even if Yang made the largest capital contribution to GTree Holdings, his shareholding ratio dropped from 3.92% to 2.65%.

The remaining 1.27% of shares were sold by Yang on the payment day to several individuals and corporations at 19,300 KRW per share. This price was 4,200 KRW lower per share than the price at which shares were transferred to GTree Holdings. The reason for selling the shares at a lower price is unknown, but through this, Yang was able to cash out approximately 6.5 billion KRW.

The problem is that about two weeks after Yang sold the shares, on the 18th of last month, GTreeBNT announced the primary results of the third U.S. Phase 3 clinical trial (ARISE-3) for its key pipeline dry eye treatment 'RGN-259.'

At that time, the announcement stated that the primary endpoint was not met, and GTreeBNT’s stock price plunged to the lower limit of 14,500 KRW. Since Yang had already cashed out his shares, he avoided a loss of approximately 1.6 billion KRW.

An industry insider commented, “The major shareholder lost market trust by selling shares ahead of the clinical results announcement. Regardless of the success of the trial, the major shareholder should have held the shares at least until the results were released,” criticizing the move.

Where Are CEO Yang’s Shares?

In response, the company stated, “There is no issue with CEO Yang’s control because GTree Holdings has committed to purchasing the 1.27% of shares Yang sold.”

According to the disclosure, GTree Holdings has entered into a stock purchase commitment with the individuals to whom Yang transferred the 1.27% shares. The condition grants GTree Holdings a right of first refusal if these parties attempt to sell the shares over-the-counter at a price higher than 23,600 KRW per share before the 31st of last month.

However, this contract has not been completed despite the deadline passing. Currently, GTreeBNT’s stock price remains around 13,000 KRW after the clinical results announcement. Since the contract price is more than 80% higher than the current price, it is likely difficult to fulfill the contract.

Furthermore, for CEO Yang to maintain control through GTree Holdings, GTree Holdings must purchase the 1.27% shares it committed to buying using Yang’s funds. This would require Yang to invest an additional approximately 1.4 billion KRW beyond the 6.5 billion KRW he previously cashed out. However, Yang has not disclosed how much he has contributed to GTree Holdings, and GTree Holdings has yet to secure the 1.27% shares.

Regarding this, a GTreeBNT official said, “GTree Holdings has paid the contract deposit and interim payment to fulfill the stock purchase commitment, and only the balance remains.” However, the official did not disclose the amount of the interim payment or its source.