‘Mapo Galmaegi’ Didim, Profit Concentration to Specific Individuals through CB Resale [After CB Issuance]

[Asia Economy Reporter Jang Hyowon] It has been revealed that Didim, a dining franchise company managing brands such as ‘Mapo Galmaegi’ and ‘Yeonan Sikdang,’ sold convertible bonds (CB) to certain individuals at a low price. The CB, which is expected to yield more than 60% profit based on the current stock price, was sold at only about 10% above the face value. While those who acquired the CB stand to gain significant profits, the dilution of stock prices caused by the conversion of CB into shares will be fully borne by existing shareholders.

According to the Financial Supervisory Service’s electronic disclosure on the 30th, Didim resold 1.2 billion KRW worth of the 7th series CB at a 9.6% premium, amounting to 1,315,114,800 KRW. The company initially disclosed that it sold the bonds for 1,248,000,000 KRW the day before but corrected the statement after media inquiries, adding approximately 67 million KRW as the cost for the call option.

The 7th series CB was issued on May 27 last year, with a total volume of 2 billion KRW. The initial subscriber was SangSangin Savings Bank. This CB included a call option allowing Didim to repurchase up to 60% of the total face value.

On the 28th, Didim exercised this call option to acquire 1.2 billion KRW worth, which is 60% of the 7th series CB. The amount Didim paid was 1,269,618,044 KRW, which is 5.8% higher than the face value. Didim stated that this amount includes principal and interest.

The conversion price of this CB is significantly lower than Didim’s current stock price, so the CB acquirers are expected to realize substantial profits. The CB’s per-share conversion price is 1,172 KRW, while Didim’s stock price as of the previous day was around 1,885 KRW. If converted immediately into shares and sold on the market, an approximate 60% return is anticipated.

Selling the converted shares at the current stock price level could yield a profit of about 700 million KRW. According to the disclosure, the CB acquirers are ‘two individuals.’ The company did not disclose the identities of these individuals.

In fact, 800 million KRW worth of the 7th series CB was immediately converted on the 28th, and 682,593 new shares will be newly listed on July 15. This accounts for about 1.64% of the issued shares. It is analyzed that the value of existing shares will be diluted due to the new share listing.

Moreover, this type of CB resale transaction is not expected to end here, as Didim has issued a large volume of CBs over the past year.

Didim, which operates dining franchises, recorded a sharp decline in sales and large-scale losses due to the COVID-19 pandemic in 2020. Consequently, former founder and CEO Lee Beomtaek sold the company last March to Jeongdam Distribution, which specializes in delivery businesses such as ‘Baedal Dwaeji Doeji’.

Since acquiring Didim, Jeongdam Distribution’s CEO Lee Jungmin has raised funds multiple times through CB issuances. From issuing the 6th series CB worth 3 billion KRW in May last year to issuing the 11th series CB on the 24th of this month, about 27.7 billion KRW worth of CBs have been issued over roughly one year. It is analyzed that the conversion of these CBs into shares will continue to weigh on Didim’s stock price.

Meanwhile, Didim operates franchise businesses and distribution under various brands such as ‘Shin Mapo Galmaegi,’ ‘Gorae Sikdang,’ ‘Yeonan Sikdang,’ and ‘Gorae Gamjatang.’ It also runs directly managed dining establishments including ‘Baekjewon,’ ‘Tokyo Hana,’ ‘Halladam,’ ‘Poolside 228,’ and ‘Gonghwachun.’