[Asia Economy Reporter Yoo Hyun-seok] Glovon is issuing convertible bonds (CB) worth 20 billion KRW. The funds raised will be used for acquiring other companies. As the possibility of recording losses for three consecutive years increases, the success of this fundraising has become crucial.
Glovon announced on November 24 last year that it would issue the 5th series CB worth 20 billion KRW. The coupon rate and maturity interest rate are 0.0% and 3.0%, respectively. The conversion request period is from April 29 next year to March 29, 2025, and the conversion price is 4,010 KRW.
The issuance target is Easy Signal Korea. In 2020, it recorded sales of 128 million KRW and net profit of 57 million KRW. Its capital stock is 30 million KRW. The payment date was changed from December 31 last year to April 29 this year. A company official said, "The delay in the payment date was due to the investor's request."
From Glovon's perspective, securing new growth engines through fundraising via CB issuance is urgent. The company has been experiencing deteriorating performance, recording losses on an individual basis since 2019.
To overcome the performance decline, the company expanded its scope from the existing cosmetics business to secondary battery materials and eco-friendly hydrogen plants. To this end, it issued the 3rd and 4th series CBs worth 11 billion KRW and 3 billion KRW, respectively. Among these, the 2nd series was used to secure licenses related to hydrogen production plants using microwave plasma technology and secondary battery materials, as well as to fund distribution business operations. The 3rd series was used for the acquisition of Green Science, which is engaged in plasma-applied businesses.
The acquisition effects have not yet materialized concretely. As of the third quarter cumulative individual basis last year, the company recorded sales of 2.3 billion KRW and an operating loss of 5.2 billion KRW, continuing the losses. If there was no dramatic change in the fourth quarter last year, it will record losses for three consecutive years. On a consolidated basis for the third quarter cumulative last year, sales were 2.5 billion KRW with an operating loss of 6.5 billion KRW. Compared to the same period last year, sales decreased and operating losses increased.
If a KOSDAQ-listed company records losses for four consecutive years based on separate or individual financial statements, it is designated as a management item. Glovon plans to use the funds raised for acquiring and investing in companies related to new businesses such as parts and materials.
A company official explained, "Our goal is to achieve operating profit this year," adding, "When engaging in new businesses or acquiring other companies, we plan to proceed in a way that can generate profits."
There are still many hurdles after the CB issuance. Concerns about overhang (potential sell-off volume) may arise. The conversion start dates for the 3rd and 4th series were November 30 last year and June 6 this year, respectively. These volumes correspond to 13.24% (4,337,729 shares) of the total shares (32,764,319 shares). Including the 5th series to be issued this time (4,987,531 shares), the total reaches 28.46%.
This volume is likely to increase further. Glovon's closing price the day before was 2,680 KRW. The conversion prices for the 3rd and 4th series are 2,872 KRW and 4,395 KRW, respectively. Since the 5th series has not yet been issued, the issue price may be revised.
If the stock price exceeds the conversion price, the burden of shares due to conversion may increase. Conversely, if the stock price remains below the conversion price, investors may demand redemption, reducing the capacity to invest in new businesses. However, the company expects that overhang will not be a significant problem. An official said, "There are major shareholder CBs and call options, so it does not seem to be a particular issue."
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