[Asia Economy Reporter Hyunseok Yoo] The first tranche of Lanix's convertible bonds (CB) has dropped to the lowest conversion price due to continued stock price declines. As the conversion price decreases, the number of shares that can be issued has increased to about 20% of the total shares, raising concerns about overhang (potential sell-off volume).
According to the Financial Supervisory Service's electronic disclosure system on the 19th, Lanix adjusted the conversion price of its first tranche CB twice this year. In June, the conversion price was lowered from 11,487 KRW to 10,836 KRW, and on the 15th, it was further reduced to 8,041 KRW. This adjustment made the CB conversion price the lowest to date.
Lanix issued CBs worth 15 billion KRW in May. At issuance, the nominal and maturity interest rates were 0%. The maturity date is May 14, 2024. The company stated that the funds would be used for research and development costs and business investments to strengthen its business competitiveness.
With the conversion price at its lowest, concerns about overhang have emerged. At issuance, the convertible shares were 1,305,823 shares, accounting for 13.61% of the total. However, as the conversion price dropped to the lowest, the number of shares that can be issued increased to 18,565,439 shares. This is a large volume, accounting for 19.44% of the total issued shares. Lanix's closing price the previous day was 7,350 KRW. Since the current stock price is lower than the conversion price, the future direction is crucial.
It would also be problematic if the bonds are redeemed at maturity without a stock price rebound, as the company's performance and financial condition are unstable. Lanix was established in 2003 and specializes in automotive communication and security/authentication solutions. Its main business includes automotive communication and security authentication solutions, as well as developing IoT-related communication and security system semiconductors. The company entered the KOSDAQ market in September 2019.
In 2018, Lanix recorded sales of 9.8 billion KRW and an operating profit of 800 million KRW. However, it turned to a loss in 2019, with sales of 9 billion KRW and an operating loss of 1.87 million KRW. Last year, sales reached 9.1 billion KRW, but the operating loss widened to 1.6 billion KRW. As of the third quarter this year, cumulative sales were 6.7 billion KRW with an operating loss of 2.2 billion KRW. Sales decreased by 3.04% compared to the same period last year, and the operating loss increased.
As the performance deterioration continued, the financial situation also worsened. The debt ratio, which was 15.4% in 2019, rose to 88.4% last year and further increased to 138.2% as of the third quarter. Additionally, retained earnings, which were 4.2 billion KRW in 2018, decreased to 4 billion KRW in 2019 and 1.8 billion KRW last year. In the third quarter of this year, it turned into a deficit of 1 billion KRW, and cash equivalents remain at only 300 million KRW.
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