[Company Exploration] The Online Auction Leader... Preparing for New NFT Business

Bonus stock issuances are spreading like a trend among listed companies. Since last month, 18 listed companies have announced bonus stock issuances. As so many companies rush to conduct bonus stock issuances, a ‘bonus stock theme stock’ has even appeared in the stock market. Bonus stock issuance is an act of transferring legal reserves to capital in accounting terms, which does not change the intrinsic corporate value. Shareholders receive new shares according to the bonus issuance ratio, but the stock price falls correspondingly. Nevertheless, due to optical illusions such as the stock price appearing cheap or increased trading volume, stock prices tend to rise in the short term after bonus stock issuance. Accordingly, Asia Economy analyzed K Auction and Techwing, companies that have ridden the wave of bonus stock issuance benefits.

[Asia Economy Reporter Park Soyeon] Last month, K Auction decided on a bonus stock issuance allocating 2 new shares per 1 existing share. Since then, it recorded the upper price limit three times. Amid this, four executives sold some of their shares taking advantage of the stock price surge caused by the bonus stock issuance. The biggest beneficiary of the bonus stock issuance was the largest shareholder TA Advisor Limited, which holds 49.01% of K Auction’s shares. TA Advisor is an investment company established by CEO Doh Hyun-soon in December 2010, with TA Management Limited (51%) and TA Partner Limited (49%), family companies of CEO Doh, as major shareholders. Both companies are 100% owned by CEO Doh and his children.

◆Securing and selling artworks with IPO proceeds boosts performance= K Auction is a company engaged in consignment sales and direct sales of artworks. It was listed on KOSDAQ in January this year. In 2006, it established the industry’s first online auction system and has become a leading domestic art auction company. It was selected as the public auction agent for recovering unpaid fines of former President Chun Doo-hwan through the Korea Deposit Insurance Corporation’s sale agency, and as a specialized sales agent for the National Tax Service. K Auction became the number one company in the domestic market by rapidly growing online auction sales through the industry’s first standardized art distribution management platform, ‘K Office.’

Recently, it is transforming into a comprehensive management business operator by developing emerging artists through subsidiaries. The accumulated data so far is a core asset. K Auction has a database (DB) of 8,178 domestic and international artists and 3,784 types of artwork materials and classifications. It holds 100,000 customer auction data related to auctions. It also possesses over 110,000 art authenticity appraisal records and 7,100 major artist signature DBs.

K Auction recorded sales of 10.9 billion KRW and operating profit of 3.4 billion KRW in the first quarter of this year. These figures represent increases of 102.8% and 51.4%, respectively, compared to the same period last year. Sales of products purchased through the initial public offering (IPO) began in earnest, and profitable auction operations centered on bidding competition and efficient auction system management were analyzed as key factors. Annual sales over the past five years have ranged from 15 billion to 38 billion KRW, with operating profits between 1.8 billion and 13.6 billion KRW. Operating cash flow has shown an increasing trend, with 11.1 billion KRW in 2019, 17.5 billion KRW in 2020, and 23 billion KRW in 2021.

Recorded upper price limit 3 times after bonus stock issuance
Artwork materials and artist DB are core assets
Transforming into a comprehensive management business operator
Promoting a complex cultural district including exhibition hall

◆Investment in new businesses and growth potential= K Auction plans to strengthen existing businesses by expanding exhibition halls and storage facilities and increasing purchases of high-priced artworks. To this end, it plans to develop K Auction Town by purchasing land and buildings worth 53.6 billion KRW in Sinsa-dong, Gangnam-gu. A large-scale exhibition hall and storage facility including a VIP private exhibition hall and reception room will be created. The plan is to complete it as a complex cultural district combining exhibitions and sales of artworks, videos, non-fungible tokens (NFTs), and editions.

A K Auction official said, “It is important to secure optimal space to expand art exhibition halls and storage facilities to enhance competitiveness in the existing art auction and sales business. In the future, we will lead not only quantitative growth through art sales but also qualitative growth of the art market through effective market formation and development of emerging artists.”

They are also preparing to expand new businesses by participating in the global NFT market. Recently, through its subsidiary Artecrypto, K Auction made a strategic equity investment in Line Next. Line Next, a subsidiary of the global mobile platform LINE, is a U.S. corporation responsible for operating the NFT platform business. K Auction plans to support the launch of the global NFT platform ‘DOSI’ by Line Next this year and the development of NFT projects based on intellectual property content. The plan is to provide art NFTs based on K Auction’s art distribution know-how.

K Auction is expected to use this platform to expand the production and distribution of art NFTs, broadening its consumer base and promoting the globalization of Korean art. Previously, K Auction entered the art fractional investment market by acquiring a 19% stake in Art Together, Korea’s first art-tech platform established in 2018.